USD / CAD exchange rate prediction – The dollar continues to rally

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The dollar continued to rally against the loonie as short-term US Treasury yields rose. The markets are focused on fighting inflation and President Biden’s decision to reappoint Fed Chairman Powell. Market participants via futures contracts now set a 50% chance that the Fed will tighten interest rates in May 2022.

Technical analysis

The dollar has risen and is ready to test trendline resistance near 1.28. Support is near the 10 day moving average, 1.2591. The 10-day moving average exceeds the 50-day moving average, which means that a short-term uptrend is almost in place. Short-term momentum turned positive as the Rapid Stochastic generated a cross buy signal. The exchange rate is overbought with the quick stochastic impression of a reading of 91, above the overbought trigger level of 80. Medium term momentum turned positive as the MACD Index (Average Convergence Divergence) mobile) generates a cross buy signal. This scenario occurs when the MACD line (the 12 day moving average minus the 26 day moving average) crosses above the MACD signal line (the 9 day moving average of the MACD line).

Fight inflation

The Fed chairman, with his new deputy, will focus on fighting inflation. The President of the United States got the message from the American people that the costs are too high. President Biden presented his Federal Reserve presidential and vice-presidential appointments on Monday and in each of their speeches they mentioned inflation. The Fed is now ready to fight inflation and the market is ready to help it by immediately raising rates. Higher rates will reduce growth and potentially lower costs.

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