- USD/CAD is sensing resistance near 1.2715 as WTI prices consolidate.
- The risk-off impulse in the market is not favouring the DXY.
- Oil prices seesaw between the US-Iranian nuclear deal and the Russia and Ukraine tussle.
The USD/CAD pair is hovering in the vicinity of 1.2700 with a high of 1.2714 recently printed as West Texas Intermediate (WTI), futures on NYMEX capped on the upside. This is seen due to potential US-Iranian nuclear deal and supported by escalating geopolitical tensions between Russia and Ukraine on the downside.
It is expected that the US may salvage the 2015 Iran nuclear deal, which will blow up oil stockpiles and reduce the demand-supply deficit further. The removal of sanctions on Iran by the US will not only spurt the total global supplies but will cap the boiling oil prices. Canada, being the largest exporter of oil to the US will find some squeeze in liquidity for those exports.
While the shelling between Ukraine armed forces and pro-Moscow rebels across a ceasefire line in eastern Ukraine has renewed the risk-off impulse and oil prices are supported again. Any further negative development on the Russia-Ukraine tussle may force the US to put sanctions on Russia, which will reduce oil supplies from Vladimir Putin’s area. Russia is one of the largest producers of crude oil and sanctions on Russian exports may squeeze the supply of oil in an already tight market.
Meanwhile, the US dollar index (DXY) is still inside the woods and performing lackluster against other safe-haven assets. The benchmark 10-year US Treasury yields has slipped below 2%.
For sure, the headlines from the geopolitical fears will keep the fireworks in the USD/CAD pair. Adding to that, the monetary policy report from the Federal Reserve (Fed) on Friday will also remain in the focus.