USD/CAD remains depressed amid bullish Oil prices, manages to hold above 1.3500 mark

• USD/CAD drops to over a one-week low and is pressured by a combination of factors.
• Bullish Oil prices underpin the Loonie and weigh on the pair amid a softer Greenback.
• The US PCE Price Index keeps the June Fed rate cut on the table and weighs on the buck.

The USD/CAD pair extends its recent pullback from the 1.3610-1.3615 supply zone, or the YTD peak and remains under some selling pressure for the sixth successive day on Monday. The downfall, however, stalls ahead of the 1.3500 psychological mark, allowing spot prices to recover a few pips from over a one-week low touched during the Asian session.

Crude Oil prices advance to a five-month peak in the wake of concerns about tighter global supply – fuelled by OPEC+ cuts, attacks on Russian refineries and upbeat Chinese manufacturing data. This, in turn, underpins the commodity-linked Loonie, which, along with a modest US Dollar (USD) weakness, is seen exerting some downward pressure on the USD/CAD pair. In fact, OPEC+ pledged to extend production cuts to the end of June.

Meanwhile, Russian Deputy Prime Minister Alexander Novak said on Friday that its Oil companies will focus on reducing output rather than exports in the second quarter. Moreover, Ukrainian drone attacks knocked out several Russian refineries, which is expected to reduce Russia's Oil exports. Furthermore, a pickup in China's manufacturing activity for the first time in six months adds to the optimism about a rise in fuel demand.

The US Dollar (USD), on the other hand, struggles to lure buyers amid expectations that the Federal Reserve (Fed) will begin its rate-cutting cycle in June, bolstered by the lack of any big surprises from the US Personal Consumption Expenditures (PCE) Price Index on Friday. This, along with the prevalent risk-on environment, is seen weighing on the safe-haven buck and contributing to the offered tone surrounding the USD/CAD pair.

Market participants now look forward to the release of the US ISM Manufacturing PMI for some impetus ahead of the Bank of Canada (BoC) Business Outlook Survey. This, along with Oil price dynamics, should contribute to producing short-term trading opportunities around the USD/CAD pair. The focus, however, will remain glued to the closely-watched monthly employment figures from the US and Canada, due on Friday.