On Tuesday, Feb. 15, the Loonie edges higher as the situation in Ukraine escalates.
- Fears of a Russian invasion support the US dollar as markets await a Fed rate rise.
- Crude oil WTI maintains recent advances.
- The overall market sentiment seems sour as traders look for direction.
USD/CAD fundamental forecast
Tensions in Ukraine impacted the market mood on Tuesday, pushing demand for the dollar higher. The dollar was also aided by talk of more aggressive interest rate rises in the United States.
USD/CAD begins the European session with a little drop from intraday highs above 1.2733 ahead of Tuesday’s European session.
Tension in Ukraine escalates
Geopolitical concerns, which can propel oil prices into the triple digits, are being actively studied. There was a close call that Russia wanted to invade Ukraine, but it was merely due to numerous media sources misinterpreting Ukraine’s president’s Facebook post to his people.
Ukrainian President Volodymyr Zelenskiy appealed to residents to raise the country’s flags from buildings and sing the national anthem on Feb. 16. Some Western media mentioned a possible commencement of a Russian invasion frightened investors considerably overnight.
However, the remarks were taken as though Ukraine’s president had been officially told that the strike would take place on Wednesday.
WTI weighing in
Ukraine’s president’s misinterpretation of the message was enough to send oil prices to their highest levels yet in the current bull cycle, with WTI printing $95.79.
The Loonie’s recent rally appears to be fueled by a drop in the price of Canada’s main export, WTI crude oil. WTI, on the other hand, is down 0.32 percent intraday at $94.96 at the time of writing.
The steady rebound of DXY from its intraday low, mostly owing to the Russia-related risk-off mentality, might further help the quotation.
In the meantime, US Treasury rates have dropped to 1.979 percent, down 1.7 basis points, as the S&P 500 Futures indicate slight losses at the time of writing, confirming the previous day’s recovery moves.
Bond coupons resumed upside momentum on Monday after sliding back from a 2.5-year high on Friday, despite a fairly positive week-start performance, as the Wall Street benchmark concluded in the red.
Key data releases from the US
From the US, we have PPI on Thursday. Then, later in the week, we have Core Retail Sales, and Fed officials will also speak.
Key data releases from Canada
Heading to the north, we have CPI tomorrow.
In the future, traders of the pair will be looking for risk catalysts. Russia-Ukraine news and Fedspeak, not to mention weekly oil inventory data, will receive much attention.
USD/CAD technical analysis: traveling cautiously in a six-week range
The Loonie is now traveling in a tight range between 1.2723 and 1.2740. So far, the pair has gained 0.07%. The pair is above its 100-day moving average on the daily chart, and the RSI is pointing upwards.
The pair is now hitting the 1.2733 level. A fall below 1.2708 will bring the pair towards the 1.2682 support level. If the Loonie falls below this level again, it will challenge the next support level, at 1.2644.
On the upside, the Loonie can go towards the next resistance level, around 1.2772. A break over the resistance level of 1.2810 will pave the door for a test of the following resistance level of 1.2836.