USD/CAD Price Prediction – USD/CAD edges higher on a stronger dollar

Key Insights

• Gold prices declined as the dollar strengthened. 
• Treasury yields rose on aggressive Fed rate hikes.
• Oil prices rose amid the EU deal on an embargo on Russian oil and the end of China lockdowns. 

USD/CAD rebounds after falling amid BoC rate hike decision due to the better-than-expected ISM Manufacturing reading and the Fed’s measures to fight inflation.

Gold prices fall as yields rise, which increases the opportunity cost of holding gold and underpins the dollar. Despite rising inflation, gold will likely not be a hedge against spiraling inflation. The dollar grew firmer amid rising yields.

Benchmark yields increase as investors maintain their focus on Fed rate hikes. The ten-year yield moved declined by 8.2 basis points to 2.928%. Oil prices become firmer amid the EU ban on Russian oil and the ending of restrictions on the Shanghai lockdown.

The Job Openings and Labor Turnover Survey (JOLTS) report for April came in at 5.46 million, dropping sharply by 455,000 from the previous month.

The gap between job openings and available workers was reduced. However, the reading still indicates that there is a tight labor market where labor supply matches the demand for labor.

The ISM Manufacturing Index, which was released today, signaled that firms plan to ease the pace at which they hire employees. The employment reading registered 49.6, which is the first reading under 50 since November 2020. Hiring will slow down relative to labor supply.

These readings come in two days before May’s non-farm payroll report. Economists estimate that 328,000 more jobs will be added from the previous month and that the employment rate will fall to 3.5%.

Technical Analysis

The USD/CAD squeaks above the 200-day moving average of 1.265 despite dropping after the BoC meeting. The Fed rate hike and focus on fighting inflation underpins the US dollar.

The currency pair may rise to the 1.267-1.268 mark. Prices likely remain capped at 1.27, but a break above that can give the currency pair an upside outlook.

Support is seen near the 50-day moving average of 1.271. Resistance is seen near the 200-day moving average of 1.266. Short-term momentum turned positive as the fast stochastic had a crossover sell signal. 

Medium-term momentum turns negative as the MACD line might generate a crossover sell signal. This scenario happens when the MACD line (the 12-day moving average minus the 26-day moving average) crosses the MACD signal line (the 9-day MA of the MACD line).

The trajectory of the MACD is in positive territory, which reflects an upward trend in price movement.