USD/CAD Rises to the Upper End of Its Range Following Increasing Geopolitical Tensions

The dollar moved into the upper end of its range against the Loonie. Geopolitical tensions caused the risk-off movement in the markets. The US benchmark ten-year yield rose over five basis points to 2.003% due to fears over the Russia-Ukraine crisis. After last week’s stronger-than-expected CPI reading, gold prices eased ahead of mounting inflation pressures. The dollar made substantial gains hitting a two-week high as the safe-haven asset became less attractive.

Technical Analysis

The USD/CAD moved higher against the Loonie as the risk-off movement lifted the dollar to the upper end of its range. Resistance is seen near a downward-sloping trend line near 1.28. The Loonie has capped the greenback at 1.28 since the end of January. Short-term momentum has turned negative as the fast stochastic generates a crossover sell signal. The exchange rate moves toward oversold territory, reflecting accelerating negative momentum. Medium-term momentum is positive as the MACD (moving average convergence divergence) index generates a crossover buy signal, but momentum decelerates. This scenario occurs as the MACD line (the 12-day moving average minus the 26-day moving average) converges to the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in positive territory with a downward sloping trajectory which points to consolidation.

Fed’s Bullard Argues for Hawkish Fed Policy

Louis Fed President James Bullard states that the Fed should fight pressures over rising inflation by taking aggressive action. He argued that the Fed should “front-load” its tightening of monetary policy. He favors a 100 bp increase in the next three meetings. Markets are pricing in seven rate hikes this year following his hawkish position.