- USD/CAD fell for the second consecutive day due to factors.
- The Ukraine crisis has given the Canadian dollar a tailwind and put it under pressure
- The moderate dollar weakness further affected the suggested tone around the pair.
- The Fed’s hawkish outlook should limit the dollar’s decline and provide some support.
The USD/CAD forecast is strongly bearish as the crude oil prices keep the Canadian dollar support while the Russian crisis ignites. At the start of the European session, the USD/CAD pair fell to four-day lows near the mid-1.2400s.
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Russian saga
Tuesday, the pair failed to capitalize on its early gains and instead encountered a new supply near the psychological 1.2500 level and fell for the second consecutive day. There are concerns about global supply shortages due to new Western sanctions against Russia over alleged war crimes in Ukraine and a stalled nuclear deal with Iran. Furthermore, this led to a temporary spike in crude oil prices, which benefitted the commodities-bound Canadian and pushed down the USD/CAD pair.
Greenback roars
However, the safe-haven US dollar did not consolidate the gains it had achieved over the past three trading sessions, despite signs of stability in financial markets. Last week, this was another factor pushing the USD/CAD pair back towards its yearly lows. However, the Fed’s escalating policy action to combat stubbornly high inflation should limit the dollar’s losses. Bearish traders must, therefore, exercise caution.
What’s next to watch for USD/CAD forecast?
The Fed was expected to raise rates by 100 basis points in the next two meetings. In the US meeting, the focus will be on the Fed’s monetary policy meeting minutes. In addition, this week’s key release of the ISM US Services PMI is expected to boost demand for the US Dollar and add momentum to the Dollar/Canadian Dollar pair. Finally, Russian-Ukrainian developments will continue to guide traders’ actions and impact oil price dynamics, offering some near-term opportunities.
USD/CAD price technical forecast: Bulls find no respite
The USD/CAD price is playing within the range. Hence, there is no clear trading opportunity at the moment. However, the technical perspective is strongly bearish as the 4-hour chart shows the key SMAs well above the price. Meanwhile, the volume shows no clear bias at the moment.
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On the other hand, the 50 and 20 SMAs are on the verge of making a bearish crossover. If it happens, we may see a bearish breakout towards 1.2400. Alternatively, the stronger USD may urge for an upside correction that may remain capped by the 1.2500 area.
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Saqib Iqbal
