USD/CAD Exchange Rate Prediction – The Dollar Slides on Lower Treasury Yields

The USD/CAD declined as U.S. yields dropped despite stronger than expected inflation and consumer spending. Manufacturing in the United States was also robust but was unable to push Treasury yields higher. The personal consumption expenditures price index, excluding the volatile food and energy components, climbed 0.3% after increasing by the same margin in July. In the 12 months through August, the so-called core PCE price index increased 3.6%, matching July’s gain.

Technical Analysis

The dollar eased against the Loonie, reversing back through support which is now resistance seen near the 10-day moving average at 1.2718. Additional resistance is seen near the September highs at 1.2896. Support is seen near the 50-day moving average at 1.2618. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. Medium-term momentum has turned negative the MACD (moving average convergence divergence) index generated a crossover sell signal. The MACD histogram is printing in negative territory with a lower trajectory which points to a higher exchange rate.

Consumer Spending Rises

U.S. consumer spending surged in August. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rebounded 0.8% in August. Data for July was revised down to show spending dipping 0.1% instead of gaining 0.3% as previously reported. Expectations were for consumer spending to increase by 0.6% in August.