USD/CAD pares some Tuesday’s gains, hovers around 1.2830s

The USD/CAD four-day rally stalled around 1.2900, retreating afterward as market player sentiment improved on hints that the Ukraine – Russia conflict can de-escalate as Ukraine has shown disposal of resuming talks, though with certain security guarantees. The USD/CAD is trading at 1.2834 at the time of writing.

The market mood remains positive, as reflected by US equity indices gaining between 2.29% and 3.38% in the day. The greenback eases from YTD highs, plunging almost 1.20%, sitting at 97.89, a headwind for the pair.

In the meantime,  US crude oil benchmark, WTI, plummets 12% in the day, trading at $110 per barrel, a $20 drop after printing a YTD high of around $129.42, despite having a solid correlation with the loonie, was ignored by market players.

Helping to put a lid on the USD/CAD fall are the expectations of the Federal Reserve beginning its tightening cycle on the following week. The US central bank is foreseen to hike by 25 bps the Federal Funds Rate (FFR) while money market futures have priced in at least six hikes by the end of 2022.

On Thursday, the US docket would feature the Consumer Price Index (CPI) for February, alongside Core CPI, just five days before Fed’s March meeting.

USD/CAD Price Forecast: Technical outlook

USD/CAD overnight was subdued in the 1.2900 area but began falling once European traders reached their desks, recorded a daily low at around 1.2803.

The USD/CAD is upward biased,  as illustrated by the daily chart. However, a correction might be underway due to the size of the upward move, near 320-pips before resuming the uptrend.

That said, the USD/CAD first support would be the 38.2% Fibonacci, at 1.2781. Breach of the latter would expose the confluence of the March 2 high and the 50% Fibonacci level at 1.2744, from where the USD/CAD could push towards the three-month-old downslope resistance trendline broken on Tuesday, though reclaimed by CAD bulls on Wednesday.