USD/CAD retreats from weekly high below 1.2800 on steady oil, geopolitical fears

• USD/CAD fades upside momentum around one-week high, after rising for four consecutive days.
• Canada announces sanctions on Russia, US rules out hopes of diplomacy as Blinken-Lavrov, Biden-Putin talks are off for now.
• US PMIs improve in February but DXY eases amid Fed policymakers’ indecision.
• Risk catalysts are important for clear directions, Fedspeak eyed as well.

USD/CAD eases from a weekly high as it struggles to extend the four-day uptrend during Wednesday’s initial Asian session. That said, the Loonie pair seesaws around 1.2765 by the press time.

In doing so, the USD/CAD traders take clues from the recently steady WTI crude oil prices, Canada’s key export item while battling the Canadian dollar sellers during sour sentiment.

Receding odds of a diplomatic solution to the Russia-Ukraine tussles offered the latest blow to the market’s risk appetite as the US ruled out the scope of a summit between US President Joe Biden and his Russian counterpart Vladimir Putin. On the same line were comments from US Secretary of State Antony Blinken’s rejection of the need for Thursday’s meeting with Russian Foreign Minister Sergei Lavrov.

Previously, market sentiment soured after Russia’s Putin recognized Donetsk and Luhansk in Eastern Ukraine as independent states and signed a decree "on friendship and cooperation". In a reaction to Moscow’s moves, the West announced multiple sanctions on Russia.

In the latest blow, Canadian Prime Minister (PM) Justin Trudeau unveiled punitive measures for Russia’s latest actions. Canada’s Trudeau joined Western allies while saying, “Will ban Canadians from all financial dealings with the so-called ‘independent states’ of Luhansk and Donetsk.” The national leader also sanctions members of the Russian parliament who voted for 'illegal' decision to recognize these so-called republics while also banning the purchases of Russian sovereign debt. Additional measures suggest sanctions on two Russian banks, as well as deployment of up to 460 members of Canadian armed forces to operation reassurance.

It should be noted that WTI crude oil prices marked the first negative daily closing in four the previous day while reversing from the fresh eight-year high, recently steady around $91.30.

Read: WTI defends $91.00 on fears of Russian invasion, API data eyed

Amid these plays, S&P 500 Futures and the US 10-year Treasury yields remain sluggish after declining 1.0% and adding around 2.0% daily in that order the previous day.

Looking forward, the economic calendar seems light for the day and hence risk catalysts, as well as Fedspeak, will keep the driver’s seat.

Technical analysis

USD/CAD bulls need validation from a seven-week-old resistance line, around 1.2785 by the press time, to retake controls. Until then, the odds of witnessing a pullback towards the 21-DMA level near 1.2720 can’t be ruled out.