USD/CAD eyes 1.2760 despite rising oil prices and uncertainty over US inflation numbers

• USD/CAD looks for a fresh upside move despite boiling oil prices.
• The DXY has strengthened on a fresh wave of risk-off impulse in the market.
• The US CPI will provide further guidance on monetary action from the Fed next week.

The USD/CAD pair has breached its oscillation range of 1.2713-1.2746 after attracting significant bids on a fresh wave of risk-off impulse in the market. The loonie has displayed weakness against the greenback despite boiling oil prices post the potential ban on Russian oil.

US President Joe Biden is in conversation with European allies to ban imports of oil from Russia. This has come on the escalation in the Russian invasion of Ukraine after the shelling of Zaporizhzhia nuclear power in Ukraine, which is also the largest nuclear power station in Europe.

Adding to that, the delay in the removal of sanctions on Iran’s nuclear deal has added optimism to the oil prices. Russia has demanded a U.S. guarantee that the sanctions it faces over the Ukraine conflict will not hurt its trade with Tehran.  This has postponed Iran's contribution to the global oil supply. Canada, being the largest exporter of oil to the US is set to receive higher inflows against the oil supply.

Meanwhile, the US dollar index (DXY) looks to reclaim 99.00 on upbeat US Nonfarm payrolls. The US employment data on Friday landed at 678k, outperforming the market estimates and previous print of 400k and 481k respectively. Apart from that, the odds advocating the Fed’s 0.50% rate hike in March remained firmer, recently 94% per the CME’s FedWatch Tool, which has further supported the greenback against the Canadian dollar.

A 25 basis points (bps) interest rate hike by the Federal Reserve is very much on the cards in March’s monetary policy meeting as per the comments from the Fed Chair Jerome Powell in his testimony at State of the Union (SOTU). However, the US Consumer Price Index (CPI) numbers from the Bureau of Labor Statistics will provide further guidance to the market participants to draw way forward, which are due on March 10.