USD/CAD Moved Higher as US Yields Surge

The dollar rose slightly against the Loonie, edging higher against most currencies. US benchmark yields surged higher, as the 10-year yield reached a three-year high at 1.96% and the 2-year yield reached a pre-pandemic high. Gold prices remained steady at their highest levels despite a slight strengthening of the dollar. The German two-year yield declined, increasing pressure on the Euro and weighing on the EUR/USD. Investors await critical inflation data expected to be released on Thursday, providing insights into how much the Fed will increase rates.

Technical Analysis

The USD/CAD moved higher against the Loonie despite remaining within a range of CAD1.2650-CAD1.2660 in February. Resistance is seen near the 50-day moving average at 1.271. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. The exchange rate moves toward overbought territory, reflecting accelerating positive momentum. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index 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 an upward sloping trajectory which points to consolidation.

U.S. Imports Surge More than Exports

The US trade deficit in goods and services for 2021 rose by 27%. The increase in imports to an all-time high of $1.8 trillion led to the rise in the deficit. The deficit rose to an all-time high of $859.1 billion, larger than the previous record of $763.53 billion in 2006. The deficit was at $676.7 billion in 2020. The goods deficit shot up 18.3% to a record $1.1 trillion last year. Food imports were the highest on record, as were those of capital, consumer and other goods. Goods exports surged 23.3% to a record $1.8 trillion, but more robust imports overshadowed strong exports.