USD/CAD drops below 1.2500 amid weaker USD, higher WTI prices

• USD/CAD remains weighed down by rebounding oil prices and a weaker US dollar.
• WTI price advances on fading Russia-Ukraine optimism on ceasefire.
• 1.2467 support appears at risk amid a sell-off in the Treasury yields.

USD/CAD is struggling to find acceptance above 1.2500, as bears maintain the upper hand amid a renewed upside in oil prices and broad US dollar weakness.

WTI prices rebounded after tumbling on Tuesday on fresh optimism that the Russia-Ukraine peace talks could yield into a ceasefire. The sentiment got a big boost after Russia said it would reduce its military activity in Ukraine, specifically around the capital Kyiv and Chernihiv, triggering a huge sell-off in the black gold.

Firmer oil prices lend support to the Canadian dollar while the US dollar bears the brunt of the retreat in the Treasury yields across the curve. The Bank of Japan (BOJ) unlimited bond-buying program-led slump in USD/JPY also added to the weight on the greenback.

Therefore, the pair remains on the back foot, with all eyes now on the US ADP jobs and Q4 final GDP release. The Russia-Ukraine updates will also have a significant impact on oil price, eventually affecting the USD/CAD pair.

Technically, USD/CAD remains poised to extend the previous decline, eyeing a test of the upward-sloping trendline resistance at 1.2467.

A breach of the latter will trigger a fresh downtrend towards 1.2400, below which the October 2021 lows near 1.2380 will be challenged.

The 14-day Relative Strength Index (RSI) is lurking in the bearish territory, backing the bearish potential.

USD/CAD: Daily chart

On the flip side, Tuesday’s high at 1.2530 will emerge as the initial hurdle, above which bears will aim for the January 21 lows of 1.2583.

Further up, the 1.2600 round figure will be on the buyers’ radars.

USD/CAD: Additional levels to consider