• Oil prices surged more than 10% as massive uncertainty sparked by Russia’s invasion of Ukraine.
• Canadian dollar gains as economy seen growing in January after strong fourth quarter.
• Market price in a 0.25% rate hike from Bank of Canada.

The Loonie pair pulls back from the bullish trend on Wednesday, The rationale behind this can be related to the  upbeat prices of Canada’s main export item WTI crude oil, upbeat economic data, as traders await the Bank of Canada’s (BOC) Interest Rate Decision.

WTI crude oil prices had crossed June 2014 peak, marked the previous day, and rallied to $109.30 on Wednesday. This move was due to massive uncertainty sparked by Russia’s invasion of Ukraine unnerved investors, leading stocks in Europe and on Wall Street to slide further.

As per Reuters, the oil cartel is likely to stick to its existing policy of increasing output by 400K barrels per day (BPD) each month in April during today’s meeting. The news quotes the reason as, “Russia’s invasion of Ukraine having not affected OPEC+ deal functioning so far.”

Whereas Tom Simons, a money market economist at Jefferies in New York said “If Russia controls more of Ukraine’s food and energy production capacity and those types of things, they may end up being more expensive for everyone around the world,” “The economic consequences of it may be more long-lasting.”

The Canadian economy mostly likely started 2022 on a strong footing, despite the impact of the Omicron variant of the coronavirus, and the fourth-quarter growth came in above expectations, official data showed on Tuesday.

Canada’s economy grew 6.7% in the last three months of 2021 on an annualized basis, beating analyst forecasts of -12.7%, while gross domestic product in January most likely rose 0.2% after stagnating in December, Statistics Canada data showed.

Moving ahead, the Bank of Canada’s (BOC) interest rate moves and forward guidance will be more important as the markets have already priced in a 0.25% rate hike, which is widely expected.

USD/CAD 4 Hour Chart:

Support: 1.2678 (S1), 1.2617 (S2), 1.2582 (S3).

Resistance: 1.2775 (R1), 1.2811 (R2), 1.2872 (R3).

Moreover, headlines from Russia-Ukraine and Chair Jerome Powell’s bi-annual testimony, as well as the US ADP Employment Change for February, will also be important to watch for clear direction. In the meantime, we expect a mixed trend for USD/CAD.