On Tuesday, February 22, the Loonie gains as demand for greenback increases amid the Ukrainian-Russian situation.
- The USD/CAD rose to a one-week high on Tuesday, owing to a strong rise in USD demand.
- As tensions between Russia and Ukraine grew, the safe-haven greenback benefited.
- The Loonie was supported by rising crude oil prices, limiting any additional advances for the pair.
USD/CAD fundamental forecast
After a four-day rally, the USD/CAD has just eased to 1.2760, near its highest levels in a week. In the early European session, the pair is trading in the red.
The Loonie, on the other hand, stays stronger as the market’s risk-off mentality coincides with stable WTI crude oil prices, Canada’s biggest export commodity.
Greenback demand rises
The US dollar’s safe-haven demand lies behind the quote’s moderately favorable circumstances during the risk-aversion phase. Market mood has sunk in recent days as Russian President Vladimir Putin sent soldiers into Eastern Ukrainian republics, claiming peace efforts as justification.
Previously, Vladimir Putin recognized Donetsk and Luhansk as autonomous entities in Eastern Ukraine and signed a proclamation “on friendship and cooperation.”
As a result, worries of a big clash with the West grew, and investors’ desire for risky assets waned.
The White House, on the other hand, stated that the decision would not inevitably result in Russian sanctions. Furthermore, at an emergency UN Security Council meeting, a Russian envoy to the UN, Vasily Nebenzya, stated that “we remain open to a diplomatic solution,” which helped calm market nerves.
Aside from the Russia-Ukraine stalemate, China’s restriction on chicken and poultry products from Canada and recent weaker Fedspeak have weighed on market sentiment and pushed the USD/CAD higher.
Bullish crude oil prices, on the other hand, provided some support to the commodity-linked Loonie. However, bulls may be held back from placing aggressive wagers and capping gains for the USD/CAD pair due to several variables.
Key data releases from the US
From the US, we have Flash PMI and CB Consumer Confidence.
Key data releases from Canada
We don’t have any significant news from the north.
Market traders anticipate the publication of flash PMI prints later in the early North American session as part of the US economic calendar.
On the other hand, the attention will stay on the developments in Ukraine. Apart from that, the USD/CAD pair should benefit from oil price movements.
USD/CAD technical analysis: trading in a tight range with a bullish tilt
The Loonie is trading in a tight range between 1.2740 and 1.2760 at the start of the European session. So far, the pair has lost -0.06%.
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 1.2745 level. A fall below 1.2729 will bring the pair towards the 1.2706 support level. If the pair falls below this level again, it will challenge the next support level, at 1.2689.
On the upside, the Loonie can go towards the next resistance level, around 1.2769. A break over the resistance level of 1.2786 will pave the door for a test of the following resistance level of 1.2810.