• USD/CAD drops to its lowest level since February and is pressured by a combination of factors.
• Bullish Oil prices underpin the Loonie and exert pressure amid a modest intraday USD pullback.
• Bets for more rate hikes by the Fed, looming recession risk could limit losses for the greenback.
• Traders now look forward to the US ISM Manufacturing PMI for some short-term opportunities.

The USD/CAD pair attracts fresh sellers following a modest intraday bounce to the 1.3535 area on Monday and drops to a fresh low since February 21 during the first half of the European session. The pair is currently placed just below the 1.3500 psychological mark and seems vulnerable below the 100-day Simple Moving Average (SMA).

Crude Oil prices opened with a bullish gap on the first day of a new week in reaction to a surprise production cut by OPEC+, which, in turn, underpins the commodity-linked Loonie and acts as a headwind for the USD/CAD pair. It is worth recalling that major oil producers announced a further output cut of around 1.16 million bpd on Sunday - ahead of a virtual meeting of the OPEC+ ministerial panel - and led to a sharp rise of nearly 6% in the black liquid.

The US Dollar (USD), on the other hand, surrenders a major part of its intraday gains and further seems to exert some downward pressure on the USD/CAD pair. A generally positive risk tone dent demand for traditional safe-haven currencies, including the Greenback. That said, any optimism in the markets, is likely to be short-lived amid concerns about a deeper global economic downturn. The worries resurfaced after data out of Asia on Friday showed that manufacturing activity in Japan contracted during March, while growth in China stalled during the reported month.

Apart from this, fresh speculations about a further policy tightening by the Federal Reserve (Fed) should act as a tailwind for the Greenback and help limit the downside for the USD/CAD pair, at least for the time being. Investors now seem convinced that rising energy prices will push inflation higher and force the US central bank to move back to its inflation-fighting rate hikes. This is reinforced by a fresh leg up in the US Treasury bond yields, which, in turn, favours the USD bulls and supports prospects for the emergence of some dip-buying around the major.

From a technical perspective, acceptance below the 100-day SMA could be seen as a fresh trigger for bears, suggesting the path of least resistance for the USD/CAD pair. This might hold back traders from placing aggressive directional bets ahead of the US ISM Manufacturing PMI, due later during the early North American session. This week's busy US economic docket also features JOLTS Job Openings on Tuesday, the ADP report on private-sector employment and ISM Services PMI on Wednesday, followed by the US jobs report, or the NFP on Friday.

Investors will further take cues from the monthly Canadian employment details, due for release on Thursday. Apart from this, traders will take cues from Oil price dynamics to determine the next leg of a directional move for the USD/CAD pair.

Technical levels to watch