USD/CAD Holds Steady Despite Heightened Russia-Ukraine Tensions

The dollar remains within a range against the Canadian dollar despite reaching a five-day high of 1.277 and then retreating to 1.272. The exchange rate’s reaction concerned recent news that Putin plans to send troops into Ukraine, viewed as the start of the war. US benchmark yields remain little changed, as the 10-year yield remains near 1.94% after sliding below 1.90%. Equity indices tumbled as the situation remains in focus for investors. Gold prices remain near highs as there is increased demand for the safe-haven metal among investors. 

Technical Analysis

The USD/CAD remains rangebound against the Loonie, as it has for most of February. Resistance is seen near a downward-sloping trend line near 1.276. Support is seen near the 50-day moving average near 1.27. Short-term momentum turns negative as the fast stochastic generates a crossover sell signal. The reading prints 72.77. Medium-term momentum is positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This scenario occurs as the MACD line (the 12-day moving average minus the 26-day moving average) converges to the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in positive territory with an upward sloping trajectory.

On Tuesday, IHS Markit released its Flash PMI, which tracks manufacturing and services sectors. The reading accelerated to 56.0 from its January reading of 51.1. A reading above 50 indicates growth in the private sector. Increased travel, availability of raw materials, and employees returning from sick leave are factors causing the significant improvement in numbers. The data improvements parallel the acceleration in business activity.