The Dollar Dropped as Treasury Yields Slipped

On Thursday, the dollar tumbled versus the Loonie in the wake of the stronger than expected Canadian CPI. U.S. Treasury yields edged lower following a larger than expected rise in Jobless claims. On the manufacturing front, the Philly Fed Manufacturing Index came out stronger than expected.

Technical Analysis

The USD/CAD dropped on Thursday after falling through the 200-day moving average on Wednesday. Resistance is seen near the 200-day moving average at 1.2497. The 10-day moving average crossed below the 50-day moving average, which means a short-term downtrend is in place. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. The exchange rate is oversold as the fast stochastic prints a reading of 3, below the oversold trigger level of 20. 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.

Canadian CPI Rise More than Expected

Canada’s consumer-price index increased 4.8% on a year-over-year basis in December; Statistics Canada said Wednesday, or slightly faster than the 4.7% rise in November. December data matched market expectations. Excluding gasoline, annual prices rose 4% in December. The last time annual inflation in Canada exceeded 4.8% was in September 1991, when the consumer-price index rose 5.5%.