USD/CAD Exchange Rate Prediction – The Dollar Eases Following Weak Home Sales

The USD/CAD edged lower on Monday and appears to be forming a bull flag pattern. The dollar lost ground against most major currencies. U.S. yields were mixed following an unexpected decline in new home sales.  Higher prices for materials, land, and labor are generating headwinds for home sales.

Technical Analysis

The USD/CAD moved slightly lower and continued to consolidating, forming a bull flag continuation pattern. This is a pause that generally refreshes higher. Support is seen near the 20-day moving average at 1.2505. Target resistance is seen near the July highs at 1.2807. Short-term momentum has turned negative as the fast stochastic generated a crossover buy signal. Medium-term momentum turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in negative territory with a falling trajectory which points to a lower exchange rate.

U.S. Housing Data Disappoints

Higher prices weighed on New Home Sales according to the latest report from the U.S. Commerce Department. The agency said that new home sales missed expectations falling to an annualized rate of 676,000, down 6% month over month and off 19.4% year over year, compare to 839,000. Expectations were for an increase by 3.4% in June to 795,000. The inventory of new homes for sale jumped from a 5.5-month supply in May to a 6.3-month supply in June.