USD/CAD dives to fresh daily low, below 1.3600 mark amid solid recovery in oil prices

• SUD/CAD comes under heavy selling pressure and is weighed down by a combination of factors.
• A solid recovery in oil prices underpins the Loonie and exerts pressure amid a softer greenback.
• Rebounding US bond yields, recession fears should limit the USD losses and lend some support.

The USD/CAD pair continues with its struggle to make it through the 1.3700 mark and attracts aggressive selling on Thursday. The sharp intraday decline drags spot prices below the 1.3600 round figure during the early North American session and is sponsored by a combination of factors.

As investors look past a dovish 50 bps rate hike by the Bank of Canada (BoC), a solid recovery in crude oil prices underpins the commodity-linked Loonie. Hopes that the easing of COVID-19 curbs in China will revive fuel demand assist the black liquid to snap a four-day losing streak to a fresh YTD low. Apart from this, a modest US Dollar weakness exerts downward pressure on the USD/CAD pair and contributes to the sharp intraday fall of around 100 pips.

As investors seek clarity on the Fed's rate-hike path, a mildly positive tone around the equity markets is seen weighing on the safe-haven greenback. That said, rebounding US Treasury bond yields, along with growing recession fears, should help limit losses for the USD. Traders might also refrain from placing aggressive bets and prefer to wait for next week's release of the US consumer inflation figures and the highly-anticipated FOMC monetary policy meeting.

The crucial US CPI report, along with the Fed decision will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the USD/CAD pair. This makes it prudent to wait for strong follow-through selling before confirming that the recent positive move witnessed over the past week or so has run out of steam. That said, bulls need to wait for a sustained move beyond the 1.3700 mark before positioning for additional gains.

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