USD/CAD Moves Below 1.2590 As WTI Oil Tests The $110 Level

Key Insights

• Canadian dollar gains ground amid rally in the oil markets. 
• Treasury yields continue to move higher, but fail to provide enough support to the U.S. dollar. 
• A successful test of the support at 1.2590 will push USD/CAD towards the support at 1.2550.

U.S. Dollar Is Losing Ground Against Canadian Dollar

USD/CAD is currently trying to settle below the support at 1.2590, while the U.S. dollar is mostly flat against a broad basket of currencies.

The U.S. Dollar Index failed to settle above the resistance at 98.35 and declined towards 98.20. In case the U.S. Dollar Index settles below this level, it will move towards the support at the 98 level, which will be bearish for USD/CAD.

There are no important economic reports scheduled to be released in the U.S. and Canada today, so foreign exchange market traders will focus on the developments in commodity markets and the dynamics of Treasury yields.

WTI oil gained strong upside momentum and tested the $110 level amid discussions of a potential EU embargo on Russian oil. In case WTI oil settles above $110, it will head towards the resistance at $112.50, which will be bullish for commodity-related currencies, including Canadian dollar.

The yield of 2-year Treasuries has recently managed to get above the psychologically important 2.00% level and is moving higher. The continuation of this trend would be bullish for the American currency.

Technical Analysis

USD to CAD is testing the support level at 1.2590. In case USD to CAD settles below this level, it will head towards the next support at 1.2550.

A move below the support at 1.2550 will push USD to CAD towards the support at 1.2525. If USD to CAD declines below this level, it will head towards the support at 1.2500. A successful test of the support at 1.2500 will open the way to the test of the support at 1.2470.

On the upside, a move above 1.2590 will push USD to CAD towards the resistance level at 1.2625. In case USD to CAD gets above this level, it will move towards the next resistance at 1.2650. A successful test of the resistance at 1.2650 will open the way to the test of the resistance at 1.2680.

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