USD/CAD Retreats After Recent Rally

Key Insights

• Healthy demand for riskier currencies provides support to Canadian dollar
• Economic reports from the U.S. exceed analyst expectations
• Markets stay focused on news from Ukraine

Canadian Dollar Gains Ground Against U.S. Dollar

USD/CAD is currently trying to settle back below the support at 1.2760, while the U.S. dollar is losing ground against a broad basket of currencies.

The U.S. Dollar Index is testing the support level at 96.70. If the U.S. Dollar Index manages to settle below this level, it will head towards the next support at 96.50, which will be bearish for USD/CAD.

Today, U.S. reported reported that Personal Income remained unchanged on a month-over-month basis in January, while analysts expected that it would decline by 0.3%. Personal Spending improved by 2.1% compared to analyst consensus of 1.5%.

Durable Goods Orders increased by 1.6% month-over-month in January compared to analyst consensus of 0.8%. The final reading of Michigan Consumer Sentiment report showed that Consumer Sentiment declined from 67.2 in January to 62.8 in February, compared to analyst consensus of 61.7.

The reports exceeded analyst expectations, but foreign exchange market traders remained focused on the war in Ukraine. Today, riskier assets gained upside momentum on hopes for negotiations and de-escalation, but it is not clear whether the situation will improve in the next few days. If the situation in the Ukraine continues to deteriorate, the U.S. dollar and other safe-haven assets will get additional support.

Technical Analysis

USD to CAD is testing the support level at 1.2760. In case this test is successful, it will move towards the next support level at the 20 EMA at 1.2730.

A move below the 20 EMA will open the way to the test of the support at the 50 EMA at 1.2705. If USD to CAD declines below this level, it will head towards the next support at 1.2680.

On the upside, a move above 1.2760 will push USD to CAD towards the resistance level at 1.2780. If USD to CAD gets above this level, it will head towards the next resistance at 1.2800. A move above 1.2800 will open the way to the test of the resistance at 1.2830.

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