USD/CAD remains on the defensive below one-month peak, downside seems cushioned

• USD/CAD edges lower on Thursday, though the downside lacks follow-through selling.
• Rebounding Oil prices underpins the Loonie and acts as a headwind amid a softer USD.
• Traders now look forward to the Advance US GDP report for short-term opportunities.

The USD/CAD pair struggles to capitalize on its recent strong recovery move from the 1.3300 mark, or a two-month low touched on April 14 and edges lower during the first half of trading on Thursday. The pair, however, manages to hold above the 1.3600 mark through the early European session and is currently placed just below a nearly one-month high touched on Wednesday.

A modest recovery in Crude Oil prices underpins the commodity-linked Loonie and acts as a headwind for the USD/CAD pair amid subdued US Dollar (USD) price action. The uptick in Oil prices, meanwhile, could be attributed to some technical buying following the recent slump to a fresh monthly low, led by looming recession fears and an increase in Russian oil exports, which offset the impact of OPEC+ production cuts.

The USD, on the other hand, continues to be weighed down by speculations about an imminent rate cut by the Federal Reserve (Fed) later this year. The expectations are being fueled by fresh concerns about banking contagion risks in the US, the debt ceiling standoff and slowing economic growth. Hence, the market focus will remain glued to the release of the Advance US Q1 GDP report, due later during the early North American session.

The growth in the world's largest economy is anticipated to have slowed to a 2.0% annualized pace during the January-March period from 2.6% in the previous quarter. Any meaningful divergence from the expected reading will be enough to infuse some volatility around the Greenback and influence the USD/CAD pair. Apart from this, Oil price dynamics should contribute to producing short-term opportunities around the major.

In the meantime, bets for another 25 bps lift-off at the next FOMC policy meeting in May remain supportive of a further rise in the US Treasury bond yields. This, in turn, acts as a tailwind for the buck and lends some support to the USD/CAD pair, warranting some caution for bearish traders and before positioning for any meaningful intraday corrective pullback.

Technical levels to watch