• USD/CAD comes under some selling pressure and is weighed by a combination of factors.
• An uptick in crude oil prices underpins the Loonie and exerts pressure amid a weaker USD.
• The Fed’s hawkish outlook, rising US bond yields, recession fears favours the USD bulls.

The USD/CAD pair opens with a bearish gap on the first day of a new week and remains on the defensive through the mid-European session. The pair, however, manages to rebound a few pips from the daily low and is currently placed just above mid-1.3600s.

A modest recovery in the global risk sentiment - as depicted by a generally positive tone around the equity markets - prompts some selling around the safe-haven US Dollar. Apart from this, an intraday uptick in crude oil prices underpins the commodity-linked Loonie and exerts downward pressure on the USD/CAD pair. That said, a combination of factors holds back traders from placing aggressive bets and limits the downside for spot prices, at least for the time being.

A sharp rise in new COVID-19 infections in China could delay the full reopening of the economy and overshadows the optimism over the easing of strict restrictions, which is expected to boost oil demand. This keeps a lid on any optimistic move in the markets and any meaningful upside for crude oil prices. Apart from this, a goodish pickup in the US Treasury bond yields, bolstered by a hawkish commentary by the Fed, should act as a tailwind for the buck and the USD/CAD pair.

It is worth recalling that the US central bank last week indicated that it will continue to raise rates to crush inflation. Furthermore, policymakers projected at least an additional 75 bps increases in borrowing costs by the end of 2023. This, in turn, favours the USD bulls and warrants some caution before positioning for any further depreciating move for the USD/CAD pair.

There isn't any major market-moving economic data due for release from the US on Monday, leaving the USD at the mercy of the US bond yields and the broader risk sentiment. Apart from this, traders will take cues from oil price dynamics to grab short-term opportunities around the USD/CAD pair.

Technical levels to watch