USD/CAD slides to mid-1.2400s, back closer to the YTD low touched last week

A combination of factors dragged USD/CAD lower for the second successive day.
The Ukraine crisis acted as a tailwind for the loonie and exerted some pressure.
Modest USD weakness further contributed to offered tone surrounding the pair.
Hawkish Fed expectations should limit the USD downside and lend some support.

Haresh Menghani FXStreet

The USD/CAD pair increased intraday losses during the early European session and dropped to a four-day low, around mid-1.2400s.

The pair struggled to capitalize on its early uptick, instead met with a fresh supply in the vicinity of the 1.2500 psychological mark and turned lower for the second straight day on Tuesday. The prospect of more Western sanctions on Russia over its alleged war crimes in Ukraine and stalled Iran nuclear deal fueled concerns about tighter global supply. This, in turn, continued acting as a tailwind for crude oil prices, which benefitted the commodity-linked loonie and exerted downward pressure on the USD/CAD pair.

On the other hand, signs of stability in the financial markets failed to assist the safe-haven US dollar to build on its gains over the past three trading sessions. This was another factor that dragged the USD/CAD pair back closer to the YTD low touched last week. Growing acceptance that the Fed would adopt a more aggressive policy response to combat stubbornly high inflation should help limit losses for the buck. This, in turn, warrants some caution for aggressive bearish traders.

It is worth recalling that the markets have been pricing in a 100 bps Fed rate hike move over the next two meetings. Hence, the focus will remain glued to the FOMC monetary policy meeting minutes, due later during the US session. The US ISM Services PMI would drive the USD demand and provide some impetus to the USD/CAD pair ahead of the key PMI release would drive the USD demand and provide some impetus to the USD/CAD pair. Traders will further take cues from developments surrounding the Russia-Ukraine saga, which will influence oil price dynamics and produce some short-term opportunities.

Technical levels to watch

USD/CAD

Overview
Today last price	1.2457
Today Daily Change	-0.0025
Today Daily Change %	-0.20
Today daily open	1.2482

Trends
Daily SMA20	1.2622
Daily SMA50	1.2679
Daily SMA100	1.2693
Daily SMA200	1.2619

Levels
Previous Daily High	1.2529
Previous Daily Low	1.2468
Previous Weekly High	1.2593
Previous Weekly Low	1.243
Previous Monthly High	1.2901
Previous Monthly Low	1.243
Daily Fibonacci 38.2%	1.2491
Daily Fibonacci 61.8%	1.2506
Daily Pivot Point S1	1.2457
Daily Pivot Point S2	1.2432
Daily Pivot Point S3	1.2397
Daily Pivot Point R1	1.2518
Daily Pivot Point R2	1.2554
Daily Pivot Point R3	1.2578

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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