USDCAD struggles around the 200-DMA around 1.2625 despite a firm US dollar

• The Loonie gives back some Monday gains, as the USD/CAD gains 0.13%.
• Eastern Europe conflict weighs on global energy prices, capping the USD/CAD upside.
• USD/CAD Price Forecast: A break above the 200-DMA opens the door towards 1.2676.

The USD/CAD trims Monday’s losses and stages a comeback, soaring in the North American session above the 1.2600 mark, approaching the 50-day moving average (DMA) at 1.2651. The USD/CAD is trading at 1.2625 at the time of writing.

Market sentiment and hawkish Fed lifted the USD/CAD above 1.2600

The market sentiment remains mixed. European equities are about to end in the red, while US stocks record gains between 1.29% and 2.33%. The greenback remains firmly bid, underpinned by US Treasury yields, while oil prices fell, so all those factors dragged the Loonie towards negative territory.

Factors like the Ukraine – Russia conflict, the lack of advancement in peace talks, and Russia’s offensive in Eastern Ukraine maintain global inflationary pressures high, including energy. That capped the greenback’s upside action, supported by a hawkish St. Louis Fed’s Bullard, who said that inflation is “far too high” and reiterated that the Fed needs to go above neutral, around 3.50%.

In the meantime, the US docket featured Chicago’s Fed President Charles Evans, who said that the US economy “will do very well even as rates rise.” Evans added that he supports a “couple” of 50 bps increases, which could lift rates to the 1.25%-2.50% neutral rate.

Aside from this, the US economic docket featured Home Sales statistics, which analysts mainly ignored. Regarding the Canadian economic docket, inflation figures on Wednesday would shed some light after the Bank’s of Canada first 50-bps rate increase, which pushed rates to the 1% threshold.

TD Analysts wrote on a note that “We look for CPI to firm to 6.1% y/y in March, with prices up 0.9% m/m. Energy will provide the main driver, led by an 11% increase in gasoline, alongside another significant contribution from food. Motor vehicles, clothing, and shelter should help drive strength in the ex. food/energy aggregate, while the BoC’s core inflation measures should firm to 3.6% y/y on average.”

USD/CAD Price Forecast: Technical outlook

The USD/CAD is trading above the 200-DMA, the first sign that the pair could be turning bullish and is preparing to jump towards the 50-DMA at 1.2651. Furthermore, oscillators support a bullish scenario and have enough room before reaching overbought conditions, opening the door for further USD/CAD upside.

With that said, the USD/CAD first resistance would be the 50-DMA at 1.2651. A breach of the latter would expose April’s high at 1.2676, followed by the 100-DMA at 1.2680 and then the 1.2700 figure.