USD/CAD run-up fades above 1.2700 as oil bulls cheer Russian news

• USD/CAD grinds higher around intraday top during the first positive day in three.
• News of Ukraine’s violation of ceasefire propelled USD, oil prices.
• Canada inflation came in stronger, US data was firmer too but FOMC minutes posed cautious optimism.
• No major data on calendar, Fedspeak, risk catalysts are the key for fresh impulse.

USD/CAD stays firmer around 1.2720, following a quick run-up to 1.2734, as market sentiment sour on geopolitical news from Russia during early Thursday morning in Europe.

It should, however, be noted that the recently upbeat prices of WTI crude oil, Canada’s main export item, seem to challenge the USD/CAD bulls of late.

That said, the market sentiment soured on Sputnik’s news saying, “Ukraine fired mortar shells and grenades on Luhansk People's Republic (LPR) locations.” Following that, Reuters quoted other sources to mention, “Russian-backed rebels in eastern Ukraine accused Kyiv government forces on Thursday of using mortars to attack their territory, in violation of agreements aimed at ending the conflict, the RIA news agency said.”

The risk-off mood can well be witnessed in the quick recovery of the US Dollar Index (DXY) and WTI crude oil prices, up 0.12% and 1.7% daily in that order. Also portraying the risk-aversion wave is the downbeat performance of US Treasury yields and stock futures.

Previously, doubts over Russia’s rolling back of some troops from the border and the US-China Phase 1 deal headlines were challenging the market sentiment. However, the oil prices were bearing the burden of positive news concerning the US-Iran deal on denuclearization.

That said, the Canadian Consumer Price Index (CPI) rose at an annual pace of 5.1% in January, above median economist forecasts for a pace of 4.8% and above December's 4.8% YoY rate of price growth, according to data released by Statistics Canada on Wednesday. On the other hand, US Retail Sales and Industrial Production rose notably beyond the market forecasts and previous readouts with the latest MoM figures of 3.8% and 1.4% respectively in January.

To sum up, USD/CAD traders will pay more attention to the risk catalysts than the second-tier US data and Fedspeak for fresh impulse.

Technical analysis

MACD conditions aren’t supporting rebound, which in turn challenge the USD/CAD buyers until the quote crosses a six-week-long resistance line, near 1.2780 by the press time.

On the contrary, a downside break of the stated immediate support line, near 1.2670, will highlight convergence of the 100-DMA and 50% Fibonacci retracement (Fibo.) of October-December 2021 upside, close to 1.2625, as the key level for bears to break.s