USD/CAD Moves Lower as the Loonie Holds Firm

Insights

• The dollar remained firm amid the Fed’s comments about 50-point rate hikes
• U.S. Benchmark Treasury yields rose and retreated slightly due to the Fed’s stance on rates and inflation
• Gold and silver prices rise as investors look to their safe-haven appeal to shield against inflation and Russia-Ukraine uncertainty
• Volatile oil prices jump as CPC pipeline disruption hurts Russian exports

The dollar faces downward bias as the commodity-linked Loonie grinds higher due to its correlation with oil prices. U.S. benchmark yields soared near recent highs, with the 10-year yield reaching near 2.34%. The dollar held firm as economic data have increased expectations for a larger rate hike in May. Oil prices dipped as supply concerns linger due to CPC pipeline disruption and the lack of Iran deal. Investors monitor the effects of how the U.S. will impose new sanctions on Russia.

This week, initial jobless claims fell to 187,000, the lowest level since 1969. Economists predicted that the reading would be 212,000. The data shows that the labor market is tightening, which is backed up by fewer Americans being on unemployment rolls. Additionally, companies need workers. Supply is greater than demand.

Technical Analysis

The USD/CAD has faced downward pressure for five straight days. The first support that the exchange rate could breakthrough is 1.25. Once it breaks, it will continue to test lower key support levels. Rising oil prices will be a headwind for the exchange rate, strengthening the Loonie. Support is seen near the 50-week moving average near 1.25, which the rate broke. Resistance is seen near the downward sloping trend line near 1.28. Short-term momentum is negative as the fast stochastic had a crossover sell signal.

The medium-term momentum is negative as the MACD line generated a crossover sell signal. This scenario happens when the MACD line (the 12-day moving average minus the 26-day moving average) crosses the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram prints positively. The trajectory of the MACD histogram is downward sloping, which likely points to downward prices.