USD/CAD Traders Looking for Oil Price for Direction
USD/CAD steadies in Asia as traders remain jittery over the possibility of increased tensions around the prospect of Russia invading Ukraine. The price of oil, which CAD trades as a proxy, has increased in proportion to the Russian risk premium. As a result, the Loonie is a tough opponent for US Dollar bulls as USD/CAD rallies have dipped below previous daily highs. At the time of this writing, USD/CAD is trading at 1.2734 in a 10-pip range as geopolitical tensions, which could push oil prices further into triple digits, are watched very closely. . It has been almost confirmed that Russia intends to invade Ukraine, but only through the misinterpretation of the Ukrainian President’s Facebook messages to his country by various media sources.
Ukrainian President Volodymyr Zelenskiy has called on Ukrainians to wave the country’s flag from buildings and sing the national anthem in unison on February 16, a date that some Western media have cited as the start date Russian invasion. However, the comments were interpreted as if the President of Ukraine had been officially informed that Wednesday would be the day of the attack. Markets react in kind and sell out, but not so if an actual invasion does take place. There was an air of doubt in the air in the market and moves were limited to what looked more like a false start. Immediately after the first instinctive moves, a Ukrainian official said Zelenskiy was not planning an attack on the 16th, but was instead responding skeptically to foreign media reports.
Still, it was scary enough for energy markets that have pushed oil prices to all-time highs in the current bull cycle with WTI in $95.79 billion. USD/CAD then made a trip to print the session low of 1.2719. However, the US dollar is a double-edged sword and benefits from both risk aversion and the prospect of a faster pace of tightening from the Federal Reserve. The US Dollar Index hit a two-week high on Monday not only due to the prospect of an escalating war, but also to comments by the President of the Federal Reserve St. Louis James Bullard, who reiterated the Fed’s call for faster rate hikes. The Dollar Index (DXY) hit 96.435, the highest level since February. 1.