- Loonie trims weekly losses, loses 0-01% on dismal market sentiment.
- The longer the war between Russia and Ukraine, the heavier the burden of global inflation will be as commodities recover.
- USD/CAD Price Forecast: Will continue lower except USD bulls push the pair decisively above 1.2530.
The USD/CAD extends its fall for the second consecutive day; After Monday’s price action posted a weekly high near 1.2600, the Loonie strengthened on high oil prices, amid bearish market sentiment courtesy of recent developments on the oil front. Eastern Europe. At time of writing, USD/CAD is trading at 1.2475.
Events in Eastern Europe show no progress, boost oil prices
US stocks ended lower, reflecting gloomy sentiment. Russian officials said that although Ukraine has made efforts to comply with some of the Russian demands, the peace talks have made no progress, the Kremlin reported. Also, as reported by Aljazeera Tweets, the Polish deputy prime minister pointed out that Russia is preparing a new attack in Ukraine and added that everything indicates that we are facing a long war.
That said, commodity prices were heading higher, led by crude oil and precious metals. The US crude oil benchmark WTI is trading at $107.44 a barrel, up 2.26% from Tuesday, while gold closes 1% higher, trading at $1,935.16 a troy ounce.
In the forex space, commodity-linked currencies such as the Canadian dollar continue to strengthen against the dollar. Overnight, USD/CAD opened near 1.2500, daily highs, and pulled back towards 1.2420 to settle around the 1.2470-90 area.
A missing Canadian economic docket left USD/CAD traders leaning on the US macro economy. The US docket released the ADP Jobs Report, which was better than expected, showing an increase of 455,000 jobs in the economy in March, more than the 450,000 expected. Additionally, US GDP for the fourth quarter of 2021 grew at its fastest pace since the third quarter of 2020. The final reading was up 6.9%, down from the 7.1% estimate.
Later, Richmond Fed President Tomas Barkin said he is open to raising rates by 50 bps at the May meeting, depending on how strong the US economy is.
USD/CAD Price Forecast: Technical Outlook
USD/CAD is facing strong support at 1.2420, which once pierced immediately jumped out, a sign that it will be defended by USD bulls. In fact, Wednesday’s price action is forming a hammer, a candle that, at the end of a bullish/bearish movement, indicates a change in trend, but would need confirmation.
To the upside, the first resistance for USD/CAD would be 1.2500. A clear break would send the pair towards a renewed test of 1.2600, but first, it would face resistance at 1.2552.
On the other hand, should the downtrend extend, USD/CAD’s first support would be the Jan 19 daily low at 1.2438. A break of the latter could open the door towards 1.2288, but he would first face a daily low at 1.2387 on November 10, 2021, followed by 1.2300 and then the aforementioned 1.2288.
Technical levels
Source: Fx Street
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