USDCAD pair fell to a two-month low of 1.2510 on the back of robust support from rising crude oil prices (with which CAD is strongly correlated) and ongoing geopolitical tensions. EU countries mull joining the US and the UK on a Russian oil embargo, while the US President discusses harsher sanctions against Russia in Brussels. Meanwhile, monthly producer inflation in Canada jumped to 3.1% in February and investors expect that the Bank of Canada will tighten monetary policy further. At its March meeting, Canadian policymakers stressed they would use monetary policy tools to return inflation to the 2% target. The US dollar was not supported by the hawkish comments of Fed's Evans, who was known so far for his ultra-dovish approach. Evans is open to a 50 basis-point hike if needed. He also mentioned that FED may start reducing the balance sheet and raise rates at the same meeting. Evans supports starting to decrease the balance sheet quite quickly, preferring a fairly aggressive pace, however the evolution of the data will be an important part of the decisions on pace as well as the steepness of rate hikes.
USDCAD dropped below major support at $1.2540 which coincides with 61.8% Fibonacci retracement of the upward wave launched in October 2021, however sellers failed to break below 1.2510 which is marked with lower limit of the 1:1 structure. As long as price sits above, further upward impulse may be launched. Source: xStation5
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