USD/CAD Rebounds But the Trend Remains Downward Sloping

The dollar rebounded against the Loonie on Monday following Friday’s decline. The stronger than expected Canadian jobs report pushed the yield differential in favor of the Canadian dollar. The 55K increase in an economy that is 10-times smaller than the U.S. economy would be equivalent to gains of 550K in the United States. U.S. Treasury yields moved higher following in the wake of Friday’s stronger-than-expected wage gains.

Technical Analysis

The USD/CAD moved higher on Monday but could not recapture resistance. The exchange rate tested resistance seen near the 50-day moving average at 1.2689. Support is seen near the 200-day moving average at 1.25. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. Medium-term momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This scenario occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in negative territory with a downward sloping trajectory which points to a lower exchange rate.

Could the Fed be More Active?

Goldman Sachs on Sunday wrote in a note to clients that it now figures the Fed to raise rates 4-times each by 25-basis points during 2022. This call comes after the Labor Department released data showing that wage inflation was rising faster than expected. Average hourly earnings rose at its fastest pace in nearly 40 years. Wages climbed 0.6% for the month and were up 4.7% year over year. That compares with respective estimates of 0.4% and 4.2%.