USD/CAD Exchange Rate Prediction – The Loonie Gains Traction on Higher Yields

The dollar gave back some of its gains against the Loonie. The stronger than expected Canadian jobs report lifted short-term Canadian yields relative to the U.S. Treasury benchmarks. The U.S. employment rate dropped more than expected on Friday but the  Canadian jobs data dwarfed it. Looking forward all eyes will be on the U.S. inflation gauges which include both the CPI and PPI. Prices have already declined. Wholesale gasoline prices in the United States are down by more than 15% since the November highs. Natural gas prices have also tumbled. Its expected to be one of the warmer winters on record.

Technical analysis

The dollar eased on Monday after breaking out above resistance but has now retraced those gains making resistance the December highs at 1.285.. Target resistance is seen near the September highs at 1.29. Support is seen near the 10-day moving average at 1.2748.  The 10-day moving average cross above the 50-day moving average, which means that a short-term uptrend is almost in place. Short-term momentum has turned negative the fast stochastic generated a crossover buy signal.

The exchange rate has moved from an overbought situation with the fast stochastic printing a reading of 69, down from a reading of 96, above the overbought trigger level of 80. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index is generated a crossover buy 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 positive territory with a sliding trajecotry which points to consolidation.