USD/CAD Exchange Rate Prediction – The Dollar Breaks Out

The dollar continued to rebound against the Loonie breaking out above trend line resistance and poised to test higher levels ahead of the Fed announcement on Wednesday. The greenback’s strength comes despite lower Treasury yields. The Fed is scheduled to end its two-day meeting tomorrow. Expectations are for the Fed to accelerate the tapering of their bond purchase program. Stronger than expected wholesale inflation buoyed the greenback.

Technical analysis

The dollar traded higher against the Loonie.  The exchange rate pushed through long term resistance near an upward sloping trend line. Support is near the 10-day moving average at 1.2758.  Additional support is seen near the 50-day moving average at 1.2546.  Short-term momentum has turned positive the fast stochastic generated a crossover buy signal. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. The MACD histogram is printing in positive territory with a rising trajectory which points to a higher exchange rate.

Wholesale Inflation Rises

The U.S. PPI Index for final demand rose by 9.6% year over year after rising another 0.8% in November. Expectations were for an annual gain of 9.2%. This is the highest in 30-years. Excluding food and energy the core prices rose 0.7% for the month, putting core PPI at 6.9%, also the largest gain on record. Estimates were for respective gains of 0.4% and 7.2%, meaning the monthly gain was faster than estimates but the year-over-year measure was a bit slower.