The Dollar Rises as Treasury Yields Surge

On Tuesday, the dollar edged higher versus the Loonie. The softer than expected Canadian Housing Starts weighed on the Canadian currency. The U.S. 2-year and 10-year U.S. Treasury yields remained at elevated levels, both hitting pre-pandemic levels. In the U.S., interest rate traders are now pricing in 100-basis points of rate hikes in 2022.

Technical Analysis

The USD/CAD was nearly unchanged, edging slightly higher. Support is seen near the 200-day moving average at 1.25. Resistance is seen near the 10-day moving average at 1.2598. 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 positive as the fast stochastic generated a crossover buy signal. 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.

Housing Starts Slide

Housing starts clocked in at 236,106 on an annualized basis, a 22% drop from November, the Canada Mortgage and Housing Corporation reported Tuesday. The agency also revised November’s data up from 301,279 to 303,813 units annualized.