USD/CAD struggles at 1.2500 on lower oil prices and a strengthening USD

• The Loonie loses traction for the first time this week, although it continues to trade at a profit.
• Fighting between Russia and Ukraine and Putin’s natural gas decree weigh on market sentiment.
• The United States would tap 1 million barrels per day of its SPR reserves.
• USD/CAD Price Forecast: Unless the pair trades above 1.2613, where the 200 DMA is, the trend is down.

The USD/CAD It breaks two days of losses and recovers some ground amid a stronger US dollar, continued hostilities between Russia and Ukraine, and falling oil prices. The Canadian dollar weakens against the USD thanks to these factors, but remains stable during the week. At time of writing, USD/CAD is trading at 1.2486.

Bearish market mood and falling oil prices weigh on USD/CAD

World stocks continue to trade in the red for the second day in a row as Russian President Vladimir Putin signed a decree stating that natural gas must be paid for in rubles from April 1. Furthermore, Putin added that procedures in euros or US dollars could also be blocked while emphasizing that Russia will supply gas at agreed volumes and prices. However, he reiterated that active contracts will be suspended if demands are not met.

In reaction to the headline, market sentiment soured, with the S&P heading lower as market players turned to the US dollar as a safe haven.

The US Dollar Index, a gauge of the dollar’s value against a basket of its rivals, advanced 0.19% to 98.021, weighing on the Loonie, also dragged down by falling oil prices.

Western Texas Intermediate (WTI), the benchmark index for US crude oil, fell from daily highs to $102 following the announcement that the White House would tap into its oil reserves and release 1 million BPD over a six month period.

Regarding the macro economy, the Canadian docket presented January GDP, which increased by 0.2%, in line with estimates, and higher than the December 2021 reading. On the US front, the inflation indicator Fed’s favorite February core PCE rose 5.4% yoy, down from 5.5% estimate, while US initial jobless claims while US initial jobless claims for the week ending March 26 they increased by 202,000, above the 197,000 expected.

USD/CAD Price Forecast: Technical Outlook

USD/CAD continues to trade lower as the daily chart shows. Thursday’s price action reached a daily high around 1.2533, but in the American session, it gave back those gains and flirted around the 1.2480 highs. That said, the downtrend is intact unless USD/CAD breaks above 1.2613, the 200-day moving average (DMA) and the top of the 1.2450-1.2600 range.

The first USD/CAD support would be the daily low of March 25 at 1.2465. A break of the latter would expose the Jan 12 low at 1.2447, followed by the Nov 10, 2021 daily low at 1.2387.