USD/CAD jumps to 1.3600 mark amid weaker Oil prices, modest USD strength

• USD/CAD rebounds swiftly from the 100 DMA, a one-week low touched this Tuesday.
• Sliding Oil prices undermines the Loonie and lends support amid a modest USD uptick.
• Bets for another 25 bps Fed rate hike and a softer risk tone benefit the safe-haven buck.

The USD/CAD pair attracts fresh buying near the 100-day Simple Moving Average (SMA) for the second successive day and stages a solid recovery from a one-week low, around the 1.3530-1.3525 region touched this Tuesday. The intraday positive move lifts spot prices to the 1.3600 neighbourhood during the early North American session and is sponsored by a combination of factors.

Crude Oil prices remain under some selling pressure for the second straight day and languish near a one-month low touched last week amid worries about economic headwinds stemming from rising borrowing costs, which might dent fuel demand. This, in turn, is seen undermining the commodity-linked Loonie and acts as a tailwind for the USD/CAD pair. The US Dollar (USD), on the other hand, touches a fresh two-week high amid the prospects for additional intraday rate hikes by the Federal Reserve (Fed) and provides an additional boost to the major.

In fact, the markets now seem to have fully priced in another 25 bps rate hike at the end of the two-day meeting on Wednesday. Moreover, the US ISM report released on Monday showed that there was a build-up of inflation pressures last month and kept alive the possibility of a further hike in June. This, along with looming recession fears and a generally weaker tone around the equity markets, further benefit the Greenback's relative safe-haven status and remains supportive of the USD/CAD pair's strong intraday rally of around 75 pips.

Next on tap is the release of the JOLTS Job Openings and Factory Orders data from the US. Apart from this, the broader risk sentiment will drive the USD demand and provide some impetus to the USD/CAD pair. Traders will further take cues from Oil price dynamics to grab short-term opportunities. The focus, however, will remain glued to the highly-anticipated FOMC decision, which, along with the US monthly employment details (NFP) on Friday, will help investors to determine the next leg of a directional move for the major.

Technical levels to watch