USD/CAD remains depressed below 1.3600 mark, downside seems cushioned

• USD/CAD meets with a fresh supply on Thursday amid the emergence of some USD selling.
• The overnight rally in oil prices underpins the loonie and further contributes to the downtick.
• Hawkish Fed expectations could act as a tailwind for the buck and lend support to the pair.

The USD/CAD pair extends the overnight pullback from the vicinity of the 1.3700 mark and edges lower through the first half of trading on Thursday. The pair is currently placed near the lower end of its daily trading range, around the 1.3570-1.3575 region, down nearly 0.30% for the day.

The US dollar struggles to capitalize on the previous day's solid bounce from a two-week low and meets with a fresh supply, which, in turn, exerts pressure on the USD/CAD pair. A modest downtick in the US Treasury bond yields, along with a recovery in the risk sentiment, further drives flows away from the safe-haven greenback.

Apart from this, the recent bullish run in crude oil prices underpins the commodity-linked loonie and contributes to the offered tone surrounding the USD/CAD pair. The black liquid shot to a three-week high after OPEC+ agreed to tighten the global supply and slash production by about 2 million bpd - the largest reduction since 2020.

That said, concerns that a deeper global economic downturn will dent fuel demand keep a lid on any further gains for the black liquid. Furthermore, expectations for a more aggressive policy tightening by the Fed should act as a tailwind for the US bond yields and the buck, which, in turn, should offer support to the USD/CAD pair.

Fed officials reiterated the US central bank's commitment to getting inflation under control and reaffirmed bets for another supersized 75 bps rate hike at the November FOMC meeting. This warrants caution before placing bearish bets around the USD/CAD pair ahead of the monthly employment details from the US and Canada on Friday.

In the meantime, traders on Thursday will take cues from the release of the US Weekly Initial Jobless Claims data and Canadian Ivey PMI. Apart from this, speeches by FOMC members and the Bank of Canada Governor Tiff Macklem should provide some meaningful impetus to the USD/CAD pair later during the early North American session.

Technical levels to watch