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The Canadian dollar remains firm versus the American counterpart, with the USD/CAD down 0.37% in the week.
Russia/Ukraine woes and US central bank hawkishness could not stop CAD bulls from extending USD/CAD losses.
USD/CAD drop extends to seven straight days amid a risk-off market mood in the equity markets, which has faltered to underpin the currency markets, portraying an upbeat sentiment, favoring commodity-driven currencies while safe-haven peers are the laggards of the day. The USD/CAD is trading at 1.2557.
A downbeat market sentiment keeps global equities pressured while the greenback remains firm. The US Dollar Index, a gauge of the greenback’s value against a basket of six currencies, climbs 0.22% sits at 98.639. The US 10-year treasury yield easies from YTD highs, down two basis points at 2.348%.
Russia – Ukraine’s concerns are back in the forefront, keeping investors on their toes. Ukrainian President Zelensky stated that talks with Russia are intricate and sometimes confrontational. On the Russian front, Foreign Minister Lavrov said that NATO’s eastward expansion continues irrespective of whether a particular nation is a member.
Later, Russian President Vladimir Putin said they intend to use Russian roubles when selling gas to non-friendly countries, which caused a jump in oil prices, ultimately benefitting the Canadian dollar.
It’s worth noting that Canada’s oil and energy exports contribute just under 10% of its GDP. WTI crude oil rises almost 5%, exchanges hands at $114.06 per barrel a day, a headwind for the USD/CAD.
The US economic docket featured more Fed speakers. On a call with reporters, Loretta Mester, Cleveland Fed President, said that the Fed would need to do some 50 bps moves this year while favoring frontloading rate hikes to better position themselves for how the US economy evolves in the second half of 2022. She further added that “I have no concerns that rate increases are going to push the US economy into recession.”
The USD/CAD is downward biased once the pair broke under the 200-day moving average (DMA), sitting at 1.2609. Given that March 3 low at 1.2586 gave way to the USD/CAD, sellers’ next target would be the YTD low at 1.2450. Nevertheless, it would find some hurdles on the way south.
The USD/CAD first support would be 1.2550. Breach of the latter would expose September 3, 2021, daily low at 1.2493, followed by January 19 YTD low at 1.2450.
Bank of Canada
