USD/CAD reached a six-week high above 1.2800 thought retreat to 1.2790s

• The USD/CAD is surging by some 0.45% on Tuesday.
• A downbeat market mood courtesy of China’s Covid-19 outbreak, Russo-Ukraine tussles, and a firm US dollar, a tailwind for the USD/CAD.
• USD/CAD Price Forecast: Bullish biased and aiming towards 1.2800.

The USD/CAD soars and records a six-week high near 1.2826 amid a risk-aversion environment that spurred appetite for safe-haven assets, boosting the greenback, the JPY, and the CHF. At the time of writing, the USD/CAD retreated from daily highs and is trading at 1.2795, shy of the 1.2800 figure.

Risk-aversion keeps the US dollar buoyant

Global equities remain defensive amidst increased Covid-19 cases in China. The outbreak that started in Shanghai already expanded to some districts of Beijing and Mongolia, threatening to trigger another raft of lockdowns that could spur a jump in inflation due to supply chain disruptions. In the geopolitical environment, Russia-Ukraine talks continue, but most news around the conflict depicts an escalation of the battle.

In the meantime, the US Dollar Index, a measurement of the greenback’s value against a basket of six peers, recorded a new two-year and half high at 102.235, but it is gaining 0.47%, sitting at 102.215. Contrarily, the US 10-year Treasury yield is losing eight and a half basis points, down to 2.740%.

An absent Canadian economic docket left USD/CAD traders adrift of the US busy week. The US docket featured the Durable Good Orders for March, which rose by 0.8% m/m, lower than the 1% estimated but far better than the 1.7% contraction of February.

Late, the CB Consumer Confidence for April at 107.3, lower than the 108 expected. Despite being a worse than expected report, Lynn Franco, Senior director of economic indicators at the Conference Board( CB), said that “the Present Situation Index declined, but remains quite high, suggesting the economy continued to expand in early second quarter.” Furthermore, Franco added that “expectations, while still weak, did not deteriorate further amid high prices, especially at the gas pump, and the war in Ukraine. Vacation intentions cooled but intentions to buy big-ticket items like automobiles and many appliances rose somewhat.”

Ahead in the US docket on Thursday would be the release of the Q1 GDP and March’s Core PCE inflation on Friday.

USD/CAD Price Forecast: Technical outlook

The USD/CAD recorded a six-week high at 1.2826 but retreated. Nevertheless, the USD/CAD bias is tilted to the upside. The Relative Strength Index (RSI) at 64.36 accelerates towards the 70 mark (overbought conditions), but with enough room, so the USD/CAD can print another leg up.

With that said, the USD/CAD first resistance would be 1.2800. A breach of the latter would expose the March 15 daily high at 1.2871, followed by the March 7 swing high at  1.2901 and then 2021 yearly high at 1.2963.