USD/CAD Tests Support At 1.2650 As WTI Oil Rallies To New Highs

Key Insights

• Canadian dollar gains ground as oil tests new highs amid concerns about potential sanctions on Russian energy sector. 
• BoC lifts interest rate to 0.5%. 
• A move below 1.2650 will push USD/CAD towards the support at 1.2625.

U.S. Dollar Declines Against Canadian Dollar

USD/CAD is currently trying to settle below the support level at 1.2650, while the U.S. dollar is moving higher against a broad basket of currencies.

The U.S. Dollar Index is currently stuck in the range between the support at 97.50 and the resistance at 97.75. If the U.S. Dollar Index moves above 97.75, it will head towards the next resistance at 98, which will be bullish for USD/CAD.

Today, the Bank of Canada released its Interest Rate Decision. BoC decided to increase the interest rate from 0.25% to 0.5%, in line with the analyst consensus. BoC noted that high commodity prices will increase inflation around the world, while “negative impacts on confidence and new supply disruptions could weigh on global growth”. BoC added that interest rates will need to rise further.

In the U.S., foreign exchange market traders focused on the ADP Employment Change report. The report indicated that private businesses added 475,000 jobs in February, compared to analyst consensus of 388,000.

WTI oil made an attempt to settle above the $112 level amid concerns about potential sanctions on the Russian energy sector. Currently, WTI oil is trading near the $108 level. In case WTI oil manages to stay above this level, it will have a good chance to get to the test of the recent highs, which will be bullish for the Canadian dollar.

Technical Analysis

USD to CAD is testing the support level at 1.2650. If this test is successful, USD to CAD will move towards the next support at 1.2625.

A move below 1.2625 will open the way to the test of the support at 1.2590. If USD to CAD declines below this level, it will head towards the next support level at 1.2550.

On the upside, the previous support at 1.2680 will serve as the first resistance level for USD to CAD. In case USD to CAD manages to settle back above this level, it will head towards the 50 EMA at 1.2700.

A successful test of the resistance at 1.2700 will push USD to CAD towards the resistance at the 20 EMA at 1.2720. If USD to CAD gets back above this level, it will head towards the next resistance level, which has recently emerged near 1.2750.

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