USD/CAD Rebounds Amid Softening Oil Prices

Insights

• The dollar weakened due to increased expectations for Fed tightening policy

• U.S. Benchmark Treasury yields surged amid more aggressive Fed expectations

• Gold and silver prices edged lower as interest rate yields see gains

• Volatile oil prices slide as supply concerns wane

Easing oil prices caused the dollar to slightly recover against the commodity-linked Loonie. U.S. benchmark yields rallied as the market prices in rate hikes of more than 25 basis points due to surging inflation. The 10-year yield rallies to a two-year high, increasing by 11 basis points in today’s trading session. The dollar eased due to expectations for rate increases, while the Euro strengthened. Gold and silver prices ease as interest rate increases lessen the appeal of non-yielding assets. Oil prices slipped due to easing supply concerns. Exports may resume from the CPC terminal. However, the E.U. remains undecided about imposing an oil embargo given their heavy reliance on Russia for oil.

U.S. Pending Home Sales for February fell 4.1%, dropping for the fourth consecutive month. Pending home sales are a forward-looking indicator on home sales one or two months out based on contract signings. Sales decreased by 5.40% year over year from February 2021. The decline is due to the rise in mortgage rates, which began in January and continued to rise in February. The 30-year fixed-rate mortgage climbed 73 basis points from December 2021 to February 2022. Additionally, the medium monthly payment takes up more of a consumer’s income, indicating that the labor market is becoming more expensive. The spike is coming at a bad time since spring is typically a busy time for home buying.

Technical Analysis

The USD/CAD snapped a seven-day losing streak as retreating oil prices helped the currency rebound to 1.250s. The pair has gained some bullish traction by recovering to the key mid-1.25 mark. However, given the dollar’s easing due to expected rate increases and rallying equity markets, bullish growth of the currency pair is limited. The pair broke through the critical level of 1.256. Support is seen near the January lows of 1.245. Resistance is seen near the 10-day moving average near 1.28. Short-term momentum is negative as the fast stochastic had a crossover sell signal.

Story continues

The medium-term momentum is negative as the MACD line generated a crossover sell 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 moving average of the MACD line). The MACD histogram prints positively. The trajectory of the MACD histogram is downward sloping, which likely points to downward prices.

This article was originally posted on FX Empire

More From FXEMPIRE: