On Tuesday, March 1, the Loonie dipped as the oil prices rose, and the greenback lacked investors’ attraction.
- After the safe-haven assets lost their attraction, the Loonie was also weakened.
- The USD/CAD has fallen below 1.2700 as oil prices have risen in response to sanctions against Russia.
- The OPEC meeting to address the oil demand-supply mismatch will spotlight.
USD/CAD fundamental forecast
The Canadian dollar rose higher on Monday than the US dollar, reversing earlier losses, as safe-haven flows drove global currency markets following the West’s stronger sanctions against Russia.
A sigh of relief
On Monday, the peace talks between Russia and Ukraine were seen as a little step toward a truce, and safe-haven assets have lost ground.
Previously, Western governments had crippled Russia’s SWIFT international banking infrastructure due to sanctions implemented in retaliation to its arbitrariness in attacking Ukraine.
Boiling oil prices
Oil prices have stayed stable at roughly $96.00, even though sanctions against Russia are expected further to constrain oil supplies in an already constrained situation. Oil prices were soaring and hovered around $100.
Meanwhile, the OPEC meeting on Wednesday, which is expected to resolve the demand-supply mismatch, will provide more insight into oil prices.
The United States, Canada’s top importer of oil, appears to be experiencing significant financial outflows as oil prices rise, supporting the Canadian dollar against the USD.
DXY loses the ground
The DXY has lost ground due to the market’s risk-off mood, which has boosted the Canadian dollar against the US dollar.
Bond rates in Canada were lower across the curve, mirroring the trend in US Treasuries. The CA10YT is now at 1.837 percent, down 5.9 basis points.
Key data releases from the US
From the US, we have PMI today. Then, later in the week, we have the NFP, and Fed officials will also speak.
Key data releases from Canada
On Wednesday, the Bank of Canada will announce its interest rate decision. The central bank is anticipated to raise its benchmark rate to 0.5 percent from 0.25 percent for the first time since October 2018.
The key mover for the Loonie will continue to be stories from the Russia-Ukraine conflict. Still, investors will also be looking at the Manufacturing Purchasing Managers Index (PMI) data from the US Institute for Supply Management (ISM), which is coming on Tuesday.
USD/CAD technical analysis: hanging in a tighter range
The Loonie is now traveling in a tight range between 1.2640 and 1.2700. So far, the pair has lost -0.09%. The pair is slightly above its 100-day moving average on the daily chart, and the RSI is pointing downwards.
The pair is now hitting the 1.2660 level. A fall below 1.2636 will bring the pair towards the 1.2559 support level. If the Loonie falls below this level again, it will challenge the next support level, at 1.2498.
On the upside, the Loonie can go towards the next resistance level, around 1.2700. A break over the resistance level of 1.2735 will pave the door for a test of the following resistance level of 1.2809.