On Thursday, the dollar tumbled versus the Loonie in the wake of the stronger than expected Canadian CPI. U.S. Treasury yields edged lower following a larger than expected rise in Jobless claims. On the manufacturing front, the Philly Fed Manufacturing Index came out stronger than expected.

Technical Analysis

The USD/CAD dropped on Thursday after falling through the 200-day moving average on Wednesday. Resistance is seen near the 200-day moving average at 1.2497. The 10-day moving average crossed below the 50-day moving average, which means a short-term downtrend is in place. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. The exchange rate is oversold as the fast stochastic prints a reading of 3, below the oversold trigger level of 20. Medium-term momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This scenario occurs as 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). The MACD histogram is printing in negative territory with a downward sloping trajectory which points to a lower exchange rate.

Canadian CPI Rise More than Expected

Canada’s consumer-price index increased 4.8% on a year-over-year basis in December; Statistics Canada said Wednesday, or slightly faster than the 4.7% rise in November. December data matched market expectations. Excluding gasoline, annual prices rose 4% in December. The last time annual inflation in Canada exceeded 4.8% was in September 1991, when the consumer-price index rose 5.5%.

This article was originally posted on FX Empire


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