USD/CAD Price Prediction – USD/CAD Consolidates Above 1.30 amid a stronger dollar and risk-off sentiment

·2-min read

Key Insights

  • Gold prices traded lower and the dollar strengthened.

  • Treasury yields eased amid risk-off sentiment and sell-off in equities.

  • Oil prices rose as supply concerns and lockdowns remain in focus.

USD/CAD trades higher and maintains its upward momentum as yesterday’s hot inflation data underpins the dollar. The dollar moves higher as investors pile in for the greenback’s safe-haven appeal.

Benchmark yields moved lower as investors rotated into bonds and sold equities following hot inflation data. The ten-year yield dropped 7 basis points today.

Gold prices moved lower and faced greater selling pressures as the dollar extends gains. Oil prices increased after volatile trading following uncertainty over Europe’s embargo on Russian oil, supply concerns, and continued lockdowns in China.

This week, initial jobless claims rose by 1,000 to 203,000 from last week’s revised level of 202,000. This reading was the highest since mid-February. The reading is consistent with the tight labor market. Job openings and quits rates are at a record high as workers are compelled to look for better opportunities.

The latest CPI data indicated that inflation will remain elevated. The CPI came in at 8.3%, which was firmer than expected. However, the reading was still below the March reading of 8.5%. The reading supports the Fed’s plan to more aggressively tighten rates due to mounting inflation pressures.

Technical Analysis

The USD/CAD consolidates above 1.30 as the safe-haven dollar continues to strengthen. The pair is having a bullish break out as a stronger dollar offsets rising oil prices. The prospect of more aggressive Fed rate hikes boosts the dollar.

Resistance is seen near the horizontal trend line near 1.31. Support is seen near the 10-day moving average of 1.29. A pullback to the 10-day moving average is an opportunity for investors to buy the dip.

Short-term momentum turns positive as the fast stochastic might have a crossover buy signal. Medium-term momentum is positive as the MACD line generated a crossover buy 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 MA of the MACD line). The trajectory of the MACD is in positive territory, which reflects an upward trend in price movement.

This article was originally posted on FX Empire