USD/CAD Gains Ground Despite Huge Rally In The Oil Market

Key Insights

• U.S. dollar moves higher against a broad basket of currencies amid flight to safety.
• Strong oil provides some support to Canadian dollar, but the impact from high demand for safe-haven assets is too strong, and USD/CAD moves higher.
• Traders will stay focused on geopolitics and sanctions on Russia in the near term.

U.S. Dollar Rebounds Against Canadian Dollar

USD/CAD is currently trying to settle above the 20 EMA at 1.2725, while the U.S. dollar is gaining ground against a broad basket of currencies.

The U.S. Dollar Index gained strong upside momentum and managed to get to the test of the resistance at 97.50. If the U.S. Dollar Index settles above this level, it will move towards yearly highs near 97.75, which will be bullish for USD/CAD.

Today, foreign exchange market traders remained focused on general risk appetite, which remains the key driver for markets. Yesterday’s optimism evaporated, and traders rushed to safety, providing support to the U.S. dollar and U.S. Treasuries.

Meanwhile, WTI oil moved above the $100 level and tested the next important level at $105, providing support to commodity-related currencies, including Canadian dollar. However, this support was not strong enough to offset the impact of the flight to safety, so the U.S. dollar moved higher against Canadian dollar.

Technical Analysis

USD to CAD is testing the resistance at the 20 EMA. In case this test is successful, USD to CAD will move towards the next resistance level at 1.2760.

A move above the resistance at 1.2760 will open the way to the test of the resistance at 1.2780. If USD to CAD manages to settle above this level, it will head towards the resistance at 1.2800.

On the support side, the nearest support level for USD to CAD is located at the 50 EMA at 1.2705. In case USD to CAD declines below the 50 EMA, it will head towards the support level at 1.2680. A move above 1.2680 will push USD to CAD towards the support at 1.2650.

For a look at all of today’s economic events, check out our economic calendar.