USD/CAD Rallies to its Highest Level Since Mid-March on Extensive Dollar Gains and Pull Back in Oil Prices 

Key Insights

• Gold prices pulled back amid a stronger dollar. 
• Treasury yields were mixed as global uncertain weights on sentiment.
• Oil prices traded lower despite lingering geopolitical tensions and uncertain demand outlook in China. 

USD/CAD hits a six-week high as a firm dollar was a tailwind for the currency pair. Benchmark yields were mixed but remain little changed amid ongoing global market uncertainty. 

Gold prices fell as the dollar soared to its pre-pandemic levels. The prospect of aggressive rate hikes and safe-haven appeal due to uncertainty in China and Europe underpin the dollar.

Oil prices fell as the volatile market responded to the prospect of stimulus in China to boost oil demand despite ongoing geopolitical tensions. The IMF stated that Asia faces a stagflationary outlook as commodity prices soar and economic growth is expected to weaken. 

Pending home sales, an index that measures contract signings, decreased for the fifth consecutive month by 1.2% from the previous month. Pending home sales increased in the Northeast and fell in the other three locations. The index slid 8.2% year-over-year.

The decrease in contract signings indicates that rising mortgage rates have reduced people’s ability to buy a home despite that demand for homes remains.

Technical Analysis

The USD/CAD is testing its year-to-date highest level near 1.29 and has a positive outlook. The decline in oil prices acted as a tailwind for the currency pair. Aggressive Fed rate hikes continue to underpin the dollar. 

Resistance is seen near March 8th highs near 1.290. Support is seen near March 15th lows near 1.276. A slide below this level can be an opportunity for investors to buy the dip of the currency pair.

Short-term momentum is positive but is decelerating as the fast stochastic had a crossover buy signal. Medium-term momentum is positive as the MACD line generated 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.