Two trades to watch: USD/CAD, Gold

USDCAD battles hawkish Fed & higher oil prices

USDCAD fell 0.1% yesterday as the loonies traced oil prices higher. WTI rallied over 7% on fears that the EU could follow in the footsteps of the Fed and ban Russian oil imports.

Strength in the Lonnie overshadowed a broadly stronger USD after Fed Powell echoed the hawkish message from the FOMC last week.

Today the USD strength is overshadowing further gains in oil, which trades 2% up today.

Canadian product prices, which are considered a guide to inflation, are due, in addition to API crude oil stockpile data.

Where next for USDCAD?

USDCAD fell out of the trading range within which it had been trading since late January, falling below 1.2650, the lower band of the trading range to a 2-month low of 1.2565.

The Doji candle shows indecision at this level, and today the price trades within yesterday’s range.

The MACD suggests that there is more downside to come. Sellers will look for a move below 1.2560 the January 26 low to open the door to 1.25 round number.

Any recovery would need to retake 1.2650 in order to expose the 50 & 100 sma at 1.2690.

Gold could come under pressure as Fed Powell talks hikes

Gold prices rose yesterday despite Fed Powell’s hawkish comments. The head of the US central bank said that the Fed was prepared to take the necessary steps to lower inflation and could hike rates by more than 25 basis points on any meeting.

Gold managed to catch a bid, most likely due to surging oil prices, boosting inflation expectations.

Today Gold is edging lower; the Fed’s hawkish position is likely to cap gains in non-yielding gold. A more hawkish Fed is bearish for Gold.

Cautious optimism surrounding Ukraine after Zelenskyy again showed a willingness not to seek NATO membership is also dragging on demand for the yellow metal and news that Russia avoided default.

The economic calendar is quiet, but Fed speakers are likely to drive the precious metal.

Where next for Gold prices?

Gold has risen from last weeks’ low of 1895 and trades within a holding pattern capped on the upside by 1955 the March 15 high and by 1915 on the lower side, a level that has offered support or resistance on several occasions over the past few weeks.

The MACD is supportive of further downside. Sellers will look for a move below 1915 to test 1900 round number and expose the 50 sma at 1880.

Resistance can be seen at 1955 ahead of 1972 the February 24 high.