USD/CAD taps 1.2800 amid worsening Ukraine crisis, rallying oil prices capped gains

• A strong pickup in the USD demand pushed USD/CAD to the highest level since January.
• Russia’s invasion of Ukraine spooked investors and boosted the safe-haven greenback.
• A sharp spike in oil prices failed to benefit the loonie or hinder the pair’s positive move.

The USD/CAD pair climbed to the highest level since January during the early part of the European session and is now looking to extend the momentum beyond the 1.2800 mark.

The pair regained strong positive traction on Thursday and built on the previous day's late rebound from the weekly low, around 1.2680 region amid resurgent US dollar demand. The worsening situation in Ukraine triggered a massive sell-off across the global equity markets and provided a strong boost to the safe-haven greenback. This, in turn, was seen as a key factor that pushed the USD/CAD pair through the 1.2780-85 region.

In fact, Russian President Vladimir Putin authorized a special military operation to protect Ukraine's Donbas region. Reports indicated that Russian forces attacked the Ukrainian border around Belarus and also fired missiles at several Ukrainian cities. US President Joe Biden called the attack unprovoked and unjustified. The developments spooked investors and drove flows towards traditional safe-haven assets, including the buck.

The strong intraday move up seemed rather unaffected by a sharp rally in crude oil prices, which tend to benefit the commodity-linked loonie. Worries that a war in Europe could disrupt global energy supplies pushed WTI crude oil prices to the highest since August 2014, though did little to inspire bearish traders. Moreover, a move beyond a four-week-old trading range hurdle supports prospects for additional gains.

That said, it will still be prudent to wait for some follow-through buying before confirming a near-term bullish breakout and positioning for any further appreciating move. Market participants now look forward to the US economic docket, highlighting the release of the Prelim GDP report and the usual Weekly Initial Jobless Claims data. The focus, however, will remain on developments surrounding the Russia-Ukraine saga.

Technical levels to watch