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USD/CAD Surges Along with U.S. Treasury Yields

By:
David Becker
Published: Feb 10, 2022, 23:30 UTC

U.S. inflation rises to 40-year highs

USD/CAD Surges Along with U.S. Treasury Yields

In this article:

The dollar moved higher against the Loonie as U.S. yields surged, pushing the yield differential in favor of the Greenback. The USD/CAD remains in its February range. U.S. benchmark yields surged higher above 2%. U.S. initial jobless claims came in at 223,000 for the week ended February 5. U.S. CPI came in hotter than expected, hitting the highest levels in 40-years

Technical Analysis

The USD/CAD moved higher against Loonie but remains rangebound. Resistance is seen near the 50-day moving average at 1.271. Short-term momentum has turned negative as the fast stochastic generated 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.

U.S. Inflation Steel the Show 

U.S. CPI rose more than expected rising 0.6% month over month compared to 0.4% expected. According to the Labor Department, annualized inflation was the hottest since 1982. CPI increased by 7.5% year over year compared to expectations that it would rise by 7.2%. Core inflation which strips out food and energy, increased by 6%, also the fastest rise in core inflation since 1982. The increase in inflation was driven by food, electricity, and shelter costs.

About the Author

David Becker focuses his attention on various consulting and portfolio management activities at Fortuity LLC, where he currently provides oversight for a multimillion-dollar portfolio consisting of commodities, debt, equities, real estate, and more.

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