- USD/CAD broke out of a multi-week trading range and surged to a nearly two-month high.
- The crisis between Russia and Ukraine boosted the safe haven USD and continued to support the move.
- Rising oil prices extended support for the loonie and capped gains for the time being.
The pair USD/CAD it pulled back a few pips from a nearly two-month high during the mid-European session and was last seen trading around the 1.2820 region, up 0.70% on the day.
The brutal market reaction to Russian President Vladimir Putin’s announcement on Thursday to launch a special military operation in Ukraine forced investors to take refuge in the US dollar as a safe haven. This, in turn, helped the USD/CAD pair gain strong positive traction and break out of a nearly four-week trading range.
Since the early morning attack, Russian forces reportedly destroyed Ukraine’s military bases and air defense systems. The missiles targeted major cities in Ukraine, including the capital Kiev, and explosions were seen in towns along the coast. In addition, Russian troops continued to cross the border with Ukraine from various directions.
The worsening situation in Ukraine kept investors on edge and pushed the dollar towards a 2022 high hit in January. That said, a sharp rally in crude oil prices provided some commodity-like Canadian dollar support and turned out to be the only factor keeping iid on any further gains for the USD/CAD pair, for now.
On the economic data front, the Prelim US Q4 report showed that the economy expanded by 7.0% during the fourth quarter of 2021, matching original estimates. Separately, US weekly initial jobless claims fell to 232,000 last week from 249,000 previously. The data did little to influence the USD or provide any lift to the USD/CAD pair.
Therefore, the market’s focus will remain glued to the events surrounding the Russia-Ukraine saga, which will play a key role in driving risk sentiment and USD demand. However, the sustained break through the aforementioned trading range hurdle around the 1.2780-1.2785 zone supports the prospects for further gains for the USD/CAD pair.
Technical levels
Source: Fx Street
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