USD/CAD looks to reclaim 1.2880 on subdued oil prices, investors await API estimates

• USD/CAD is rallying towards 1.2880 on softer oil prices.
• Germany refused to boycott the Russian oil imports overnight.
• Investors are focusing on API’s oil stock report for further guidance.

The USD/CAD pair has violated Monday’s high at 1.2821 and is extending its upside towards 1.2880 as the West Texas Intermediate (WTI) oil prices erased bullish opening gap gains from Monday. WTI prices remained subdued in the early Asian session after Germany refused to prohibit the Russian oil imports overnight.

The statement from German Chancellor Olaf Scholz that “Germany is accelerating its plans to expand its use of alternative energy sources but cannot halt imports of Russian energy overnight” has barricaded the rally in the oil prices. The statement seems a little in coordination with the European Union (EU)’s decision to cut its Russian gas imports by two-thirds a year but completely diverted from the US verdict of immediately banning the imports of oil from Russia. It seems that the prohibition of Russian oil in a gradual mode has put pressure on oil prices.

Moreover, Russia’s Deputy Prime Minister Alexander Novak warned the Western allies that, “Oil price could more than double to over $300 per barrel,” if the West boycott the Russian oil. However, the statement failed to underpin the loonie against the greenback.

The US dollar index (DXY) has bounced back after a minor pullback towards the psychological figure of 99.00. The DXY is likely to remain muted in the absence of any potential trigger going forward. Investors are eyeing the US inflation numbers for further guidance, which are due on Thursday.

Meanwhile, investors are focusing on American Petroleum Institute (API)’s oil stockpiles report, which is due later on Tuesday. Previously, it landed at -6.1 million barrels.