USD/CAD Exchange Rate Prediction – The Dollar Rallies Despite Falling Yields

The dollar continued to rebound against the Loonie. The greenback’s strength comes a stronger than expected U.S. Consumer price index. Expectations are for a 6.7% year-over-year increase. Despite the robust gains in the year over year index, U.S. yields moved lower, which capped the upside for the greenback

Technical analysis

The dollar traded higher against the Loonie.  Resistance is former support near the 10-day moving average at 1.2748.  Support is seen near the 50-day moving average at 1.2536.  Short-term momentum has turned positive 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. The MACD histogram is printing in negative territory with a declining trajectory which points to lower prices.

Consumer Prices Rise but Market is Prepared

Jerome Powell’s coments last week has the market set up for a rate hike following testimony to the House and the Senate. Today’s mixed CPI failed to buoy yields which sold off. The consumer price index, rose 0.8% for November, slightly lower than the 0.9% expected and 6.8% pace year over year, which was the fastest rate since June 1982. Expectations were for a headline year-over-year increase of 6.7%. Excluding food and energy prices,  CPI was up 0.5% for the month and 4.9% from a year ago.