Tensions seem to be flaring between Russia and Ukraine again, so risk-off flows are in play.
But will a potential oil rally lift the Loonie?
Before moving on, ICYMI, yesterday’s watchlist checked out EUR/USD’s bearish pullback ahead of the U.S. retail sales and FOMC minutes release. Be sure to check out if it’s still a valid play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
U.S. core retail sales jumped 3.3% in January after earlier 2.8% slump
U.S. headline retail sales rose 3.8% vs. projected 2.1% increase
U.S. industrial production rebounded by 1.4% after earlier 0.1% dip
Canadian headline CPI up 0.9% vs. 0.6% forecast, -0.1% previous
Canadian core CPI at 0.8% vs. previous flat reading
Biden administration says more Russian troops arrived at Ukraine border Wednesday
FOMC minutes acknowledged price pressures but wary of overdoing rate hikes
France says Iran nuclear deal only a few days away
Australian economy added 12.9K jobs in January vs. projected flat reading
Australia’s unemployment rate unchanged at 4.2% as expected
Japanese core machinery orders jumped 3.6% vs. projected 2.0% slump
Upcoming Potential Catalysts on the Forex Economic Calendar:
U.S. Philly Fed index at 1:30 pm GMT
FOMC member Bullard’s speech at 4:00 pm GMT
New Zealand quarterly PPI at 9:45 pm GMT
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! 🔥 🗺️
What to Watch: USD/CAD
Risk aversion seems to be creeping back into the financial markets on fresh fears of attacks between Russia and Ukraine.
Word through the grapevine is that more Russian troops arrived at the border instead of being withdrawn while Ukrainian forces are reportedly firing mortars and grenades.
While these headlines sparked another flight to safety that boosted the dollar, the oil-related Loonie might be able to hold its ground.
Recall that crude oil staged a strong rally earlier in the week, as investors feared that the conflict might result to production outages and supply disruptions. In turn, this could prompt another global energy crunch, especially since demand is starting to pick up.
If that’s the case, USD/CAD might turn upon hitting the ceiling at the top of its range around 1.2785. Stochastic is on the move up for now, suggesting that buyers are in control, but the oscillator is also approaching the overbought region.
The 100 SMA is above the 200 SMA, though, so the path of least resistance might be to the upside. Sustained risk-off flows might spur a bullish breakout from the range, so I’d keep my eyes peeled for either reversal or continuation candlesticks at the top.
Don’t forget that there are talks of Iran possibly securing a deal to have sanctions lifted, which could mean higher oil output and downside pressure on prices.
