The USD/CAD rallied on Monday breaking out and hitting highs not seen since February. The dollar was broadly higher against most major currencies as fears of the Delta variant of the COVID virus weighed on riskier assets. U.S. yields declined sharply and stocks fell, which gave the greenback a safe haven bid. The economic highlight of the week for Canada is the May retail sales report on Friday, which is expected to be weak. On Monday, the National Association of Home Builders reported a dip in their July index to 80. The index hit a record high of 90 in November of last year. Of the index’s three components, current sales conditions fell 1 point to 86. Buyer traffic declined 6 points to 65, and sales expectations in the next six months rose 2 points to 81.
The USD/CAD surged on Monday rising 1.2% after increasing 1.3% last week. The surged in the currency pair is likely due to an increase in the demand for safe-haven assets. The currency pair sliced through resistance which is now support near the April highs at 1.2658. Target resistance is seen near the February highs at 1.2864. The exchange rate is overbought. The current reading on the fast stochastic is 91, above the overbought trigger level of 80 which foreshadows a correction. Short-term momentum has turned negative as the fast stochastic generated a crossover buy signal. Medium-term momentum is positive as the MACD (moving average convergence divergence) histogram prints in positive territory with an upward sloping trajectory which points to a higher exchange rate.