USD/CAD jumps off the 1.2400 mark but remains trading with losses

• The Loonie gains some ground and clings to Tuesday’s gains, as the USD/CAD falls 0.07%.
• Europe’s new tranche of sanctions on Russia affects peace talks as hopes of diplomatic exit wane.
• Positive data from Canada and the US is about to set the USD/CAD to finish flat Tuesday’s session.
• USD/CAD Price Forecast: Neutral biased, but Tuesday’s price action depicts solid buying pressure around the 1.2400 mark.

The USD/CAD have been seesawing in a volatile session on Tuesday amid the North American session, in a 90-pip range, with the US dollar of late, recovering some ground against the Loonie, but keeps trading in the red. At the time of writing, the USD/CAD slides and is trading at 1.2460.

Mixed market sentiment and Fed speaking lift the greenback

Fluctuating European and US equities reflect a mixed market mood. The prospects of a diplomatic exit to the Russo-Ukraine conflict wane. Europe’s response to Russian war crimes in Bucha, from Russian troops to civilians, escalated the conflict. Germany and France expelled Russian diplomatics while the EU explores a coal and oil embargo against Russia. However, there are still some discussions in the latter as the German Finance Minister Lindner said that a ban on Russian gas imports would be more harmful to Germany than Russia.

On Tuesday, Fed Governor Lael Brainard said that the US central bank “is prepared to take stronger action if inflation and inflation expectations suggest the need to do so.” She added that policy would be tightened “methodically” with a series of interest rates and would begin to lower the balance sheet as soon as the May meeting.

Later, Kansas City Fed President Esther George (voter 2022) said that a 50 bps move would be an option to consider, as conditions favor going faster than before. She emphasized the need for the US central bank to go above neutral to bring inflation down.

The Canadian economic docket featured February’s Balance of Trade which printed a surplus of C$2.66 billion against C$2.4 billion estimated, but trailed January’s reading, revised up to C$3.12 billion. The US docket unveiled March’s US ISM-Non Manufacturing PMI, which rose to 58.3, higher than the 58.1 estimated and better than the 56.5 from the previous reading.

USD/CAD Price Forecast: Technical outlook

The USD/CAD dipped to a fresh YTD low during the session at 1.2402, but the greenback recovered some ground and lifted towards 1.2450s, so Tuesday’s price action is forming a hammer, meaning that buying pressure overtook bears around the 1.2400 area, which would be a difficult support level to surpass. Nevertheless, to pose a threat to CAD bulls, USD ones would need to reclaim 1.2540, which then would expose the 200-day moving average (DMA) at 1.2615.

The USD/CAD is neutral biased, and upwards its first resistance would be 1.2493. Once cleared, the next resistance would be 1.2500, followed by 1.2540. On the flip side, the USD/CAD first support would be 1.2400. A decisive break would expose November 10 daily low at 1.2387, followed by October 21 daily low at 1.2288.