USD/CAD hovers around weekly high below 1.2800 as risk-aversion joins steady oil

• USD/CAD prints four-day uptrend to refresh one-week high, sidelined of late.
• Market sentiment remains sour on Russia-Ukraine headlines, WTI struggles to keep gains around multi-day peak.
• US, Canadian traders’ return, economic data will offer fresh impulse.
• Fedspeak, geopolitical updates are more important for clear directions.

USD/CAD pares intraday gains around the highest levels in one week, recently easing to 1.2760 after a four-day uptrend. Even so, the Loonie pair remains firmer as the market’s risk-off mood joins steady prices of Canada’s main export item, WTI crude oil, during early Tuesday.

Underneath the quote’s mildly positive conditions are the US dollar’s safe-haven demand during the risk-aversion wave. Market sentiment soured of late amid after Russian President Vladimir Putin ordered troops inside Eastern Ukrainian states, citing peacemaking efforts. Previously, Russian President Putin declared Donetsk and Luhansk in Eastern Ukraine as independent states and signed a decree "on friendship and cooperation".

The news backed the previous Western warnings over the Russian invasion of Ukraine, which in turn pushed the United Nations (UN) to call an emergency meeting. During the meet, Secretary-General for Political Affairs, Rosemary A. DiCarlo, said that she regrets the order to deploy Russian troops into eastern Ukraine on a reported 'peacekeeping mission'.

It’s worth noting that the UK, the US and Canada showed readiness to announce fresh economic sanctions on Moscow. Further, Japan Yomiuri mentioned Japan’s warning to stop the chip exports to Moscow if it invades Ukraine whereas Australia PM Scott Morrison said that they will be in lockstep with allies on sanctions on Russia.

To defend the moves of Russian President Putin, Moscow’s UN Envoy said, “Allowing 'a new bloodbath in the Donbas is something we do not intend to do.'” On the same line were comments from China’s UN Ambassador who said, “All parties concerned must exercise restraint, avoid any action that might fuel tensions.”

Other than the Russia-Ukraine standoff, China’s banning of poultry, poultry products from Canada joins recently softer Fedspeak to weigh on market sentiment and propel USD/CAD moves. Federal Reserve Board Governor Michelle Bowman followed the tunes of Chicago Fed President Charles Evans and New York Federal Reserve Bank President John Williams on Monday while saying, “It is too soon to tell if the Fed should hike 25 or 50bps in March.”

Elsewhere, WTI crude oil initially refreshed weekly top to $93.65 before retreating to $92.50. In doing so, the black gold remains mostly unchanged around the highest levels in the eight-year, flashed in the last week.

Amid these plays, S&P 500 Futures dropped over 1.60% whereas the US 10-year Treasury yields declined seven basis points (bps) to 1.85% at the latest.

As traders from the US and Canada return from a long weekend, their reaction to the latest macros will be crucial for USD/CAD moves. Also important will be Canada’s ADP Employment Change for January as well as the preliminary readings of the US PMIs for February.

Read: US Markit PMIs Preview: Services sector has room for upside surprise, boosting the dollar

Technical analysis

A six-week-old triangle restricts short-term USD/CAD moves between 1.2780 and 1.2730. However, bullish MACD and firmer RSI keep buyers hopeful.