USD/CAD Reaches Six-Week High Amid Firmer Dollar

Key Insights

• Gold prices rose amid concerns over economic growth and inflation.
• Benchmark yields continued to fall amid China’s Covid outbreak and concerns over an economic slowdown.
• Oil prices rebounded after dropping in China shutdown concerns.

USD/CAD hits a six-week high as a firm dollar was a tailwind for the currency pair. Benchmark yields continued to slide several basis points due to uncertain growth sentiment and lingering concerns over China’s Covid situation.

Gold prices rallied about 0.66% after pulling back for three consecutive days as investors looked for a safe haven from weakening economic growth prospects and spiraling inflation.

Oil prices moved higher after tumbling yesterday due to demand loss from China’s Covid-19 shutdowns. 1 million barrels were lost due to China’s shutdowns. 

Several economic data points were released today. Durable goods orders, which are products meant to last at least three years, increased by 0.8% for the sixth time in seven months. Orders for durable goods fell in February by a revised decline of 1.7%.

Core orders advanced 1% this month. Investors view these orders as a signal of future business prospects and might help economists finalize Q1 GDP forecasts, so the increase from the last month is encouraging. 

However, the economic data is not going to sway the Fed of its hawkish monetary policy. US Q1 GDP and Core PCE data will likely underpin the hawkish Fed decision.

Technical Analysis

The USD/CAD increased by around 0.50%, hitting a six-week high near 1.279. A firm dollar and the China Covid outbreak are a tailwind for the currency pair. These factors underpin that USD/CAD should garner upward momentum. 

Resistance is seen near 1.2800 A break above that would lead to the next resistance near the March 18th high of 1.286. Support is seen near the 50-day moving average near 1.264.

Short-term momentum turned 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.