USD/CAD Trades Heavily in the Wake of the Fed Rate Hike

Insights

• The dollar reversed gains against the Loonie after Fed rate hike
• U.S. Benchmark Treasury yields slid
• Gold and silver rebound 
• Oil prices surge amid warning of Russian oil shut down and supply shortage

The dollar slipped against the Loonie as investors digested the Fed rate hike. U.S. Treasury yields moved slightly lower. Gold prices rallied due to the Fed tightening and looming uncertainty of geopolitical tensions. Oil prices rally as supply shortages become a concern, potentially shutting down Russian oil. 

Last week’s initial jobless claims decreased to 214,000 from 229,000 the previous week, dropping by 15,000. Expectations for this week were 220,000. This week’s reading is a two-month low. The data indicates that the labor market has largely recovered from the pandemic. The data shows that a strong labor market can withstand higher interest rates.

Technical Analysis

The USD/CAD continues to tumble after the Fed’s announcement. The Fed rate hike can strengthen the U.S. dollar relative to other currencies and result in a breakout. A breakout above the downward sloping trend line near 1.29 will get USD/CAD out of its nearly three-month-long range. Support near the 50-day moving average that comes in near $1.268. Resistance on the currency pair is seen near the 10-day moving average near 1.276. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal.

The medium-term momentum is negative 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 moving average of the MACD line). The MACD histogram prints positively. The trajectory of the MACD histogram is downward sloping, which likely points to downward prices.