USD/CAD Price Prediction – USD/CAD edges lower despite rising dollar and yields

Key Insights

• Gold prices moved lower as the dollar rallied. 
• Treasury yields climbed higher.
• Oil prices rose amid the EU agreement on Russian oil embargo. 

USD/CAD edges lower amid BoC 50-basis point rate hike expectations despite the recovery of the US dollar. Gold prices slid as yields rise and the dollar reverses last week’s losses. Gold could not capitalize on the dollar’s weakness or lower yields from last week.

The dollar strengthened as the peak of inflation might have been reached. Benchmark yields move higher as inflation concerns remain in focus. The ten-year yield increased by 6 basis points. Oil prices surged as the EU clenched an agreement to ban 90% of Russian oil by the end of the year. 

The embargo marks the EU’s six packages of sanctions on Russia. Emergency measures will be imposed to ensure enough oil supply. 

The Case-Shiller Home Price Index revealed that home prices rose 20.6% in March compared to March 2021. The Case-Shiller index is a three-month running average ending in March.

The reading signals that mortgage rates continue to rise, which was passed on to rising home prices. Mortgage rates came in at 3.29% in January and climbed to 4.67% in March. 

As the Fed hikes rates, mortgage rates continue to rise. People are going to stop purchasing homes soon if home prices keep rising. The deceleration in home prices is difficult to predict, but price growth cannot go on much longer. 

Technical Analysis

The USD/CAD breaks below the 200-day moving average of 1.266 ahead of the BoC meeting. If the currency pair remains below that level, it will continue to face downward pressure. However, a break above the 200-day moving average may buck the trend and bring USD/CAD to the 1.267-1.268 mark. 

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.