USD/CAD pulls back from key resistance area to near 1.2750 after Biden sanction announcement

• USD/CAD has pulled back to the 1.2750 area having earlier tested key resistance in the upper 1.2700s.
• Focus remains very much on geopolitics, with US President Biden just announcing new sanctions on Russia.

In choppy trading conditions as FX market participants observe developments in the rapidly escalating Russia/Ukraine crisis saw USD/CAD rally to test a key level of resistance in the upper 1.2700s on Tuesday. The pair has since pulled back from session highs in the 1.2780s to near the 1.2750 mark, where it now trades flat on the day and close to the centre of the day’s 1.2720-1.2780ish range. US President Joe Biden just delivered a speech where he, as expected, unveiled new US sanctions against Russian banks, sovereign debt and wealthy individuals, joining the likes of the UK and EU who had already announced similar measures.

Focus now shifts back to the ceasefire line between Ukraine and the separatist-held provinces in its east, where fighting has picked up in recent days, as well as Russia-backed attempts to stage so-called “false-flag” events. Russia’s parliament on Tuesday gave President Vladimir Putin permission to authorise the creation of Russian military bases in the separatist regions of eastern Ukraine, and as Russian forces continue to amass on Ukraine’s borders, investors fear a full-scale invasion looms.

This suggests more choppiness ahead of the likes of USD/CAD and technicians will be eyeing a potential break above resistance near-1.2800, which could open the door to a push towards December highs above 1.2950. One thing to bear in mind for USD/CAD though is that a full-scale Russian invasion of Ukraine would likely see oil prices shoot through the roof on fears of global supply disruption, which could weigh on the pair. For the time being then, USD/CAD will likely continue to swing between recent 1.2650-1.2800 levels until the geopolitical picture becomes clearer.