USD/CAD Exchange Rate Prediction – The Dollar Eases as Safe-haven Flows Ebb
The USD/CAD gave back all of its weekly gains and is now lower for the week. The dollar was broadly down against most major currencies. U.S. yields were mixed, with the 10-year yield rising and the two-year stable. The economic highlight of the week for Canada is the May retail sales report on Friday. The U.S. 20-year treasury auction was weaker than expected as yields needed to back up by 2-basis points just minutes before the auction to accommodate the lack of buying interest. The backup in yields seemed to weigh on the greenback, leading to a softer USD/CAD.
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Technical analysis
The USD/CAD gave back some of the gains it experienced this week following Monday 1.2% gain. The currency pair sliced through resistance which is now support near the April highs at 1.2658. Target resistance is seen near the February highs at 1.2864. Short-term momentum has turned negative as the fast stochastic generated a crossover buy signal. The movement from overbought on the fast stochastic near 91, down to 74, reflects accelerating short-term negative momentum. Medium-term momentum is positive as the MACD (moving average convergence divergence) histogram prints in positive territory with an upward sloping trajectory which points to a higher exchange rate.
The Canadian Economy Could Accelerate
The opening of the Canadian economy has been slower than expected, according to Finance Minister Freeland. The lack of demand has come from the most recent lockdowns and the lack of vaccination. The vaccination stream will likely pick up as shots make their way to Canada. The upshot is that the government seems willing to continue to support revenue programs to businesses and households well beyond the dates initially agreed upon in September.