USD/CAD Exchange Rate Prediction – The USD/CAD Drops but is Oversold

The USD/CAD continued to trend lower on Wednesday, hitting a 3-month low as the greenback fell against most major currencies. Stronger than expected Canadian CPI buoyed short-term Canadian yields and pushed the interest rate differential against Treasury yields further in Canada’s favor.

Technical Analysis

The dollar tumbled against the Loonie, and the trend continues to point to a stronger Canadian dollar. Resistance is seen near the 10-day moving average at 1.2417. Support is seen near the July lows at 1.2308. The 10-day moving average has crossed below the 50-day moving average, which means a short-term downtrend is in place. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. Prices are oversold as the fast stochastic is printing a reading of 1 below the oversold trigger level of 20, which could foreshadow a correction. The RSI is printing a reading of 29, below the oversold trigger level of 30. 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 lower exchange rate.

Canadian CPI Rise More than Expected

According to the data published by Statistics Canada, the Canadian Consumer Price Index increased by 4.4% in September from 4.1% in August. This reading came in higher than the market expectation of 4.3%. The Bank of Canada’s Core CPI, which excludes volatile food and energy prices, rose to 3.7% in the same period, compared to analysts’ estimate of 3.6%.