USD/CAD trades with modest losses below mid-1.3700s, downside seems cushioned

• USD/CAD meets with a fresh supply on Thursday and is pressured by a combination of factors.
• A modest uptick in Oil prices underpins the Loonie and weighs on the pair amid a weaker USD.
• The fundamental backdrop warrants some caution before positioning for any further downfall.

The USD/CAD pair extends the previous day's modest pullback from the vicinity of the weekly high, around the 1.3815 region, and remains under some selling pressure on Thursday. The steady intraday descent remains uninterrupted through the first half of the European session and drags spot prices to a fresh daily low, around the 1.3720 region in the last hour.

Crude Oil prices gain some positive traction and reverse a part of the overnight slump to a 15-month low amid the latest positive development surrounding the Credit Suisse saga. This, in turn, is seen underpinning the commodity-linked Loonie and dragging the USD/CAD pair lower amid the emergence of some US Dollar selling. The troubled Swiss bank announced this Thursday that it would borrow up to $54 billion from the Swiss National Bank (SNB) to shore up the liquidity. This led to a modest recovery in the global risk sentiment and weighs on the safe-haven buck.

Investors, however, remain concerned about a broader systemic crisis against the backdrop of last week's collapse of two mid-size US banks - Silicon Valley Bank and Signature Bank. This, along with fresh turmoil in the European banking sector keeps a lid on the optimism, which is evident from the prevalent cautious mood around the equity markets. Apart from this, reviving bets for at least a 25 bps rate hike by the Federal Reserve at its upcoming meeting on March 21-22 should act as a tailwind for the Greenback and limit losses for the USD/CAD pair, for the time being.

Furthermore, worries that a deeper global economic downturn will dent fuel demand should cap any meaningful upside for the black liquid. This, along with the fact that the Bank of Canada (BoC) became the first major central bank to pause its rate-hiking cycle last week, could undermine the Canadian Dollar. The fundamental backdrop supports prospects for the emergence of some dip-buying around the USD/CAD pair. This, in turn, warrants some caution for aggressive bearish traders, or before positioning for any further intraday depreciating move for the major.

Market participants now look forward to the US economic docket, featuring the usual Weekly Initial Jobless Claims, the Philly Fed Manufacturing Index, Building Permits and Housing Starts later during the early North American session. This, along with the European Central Bank (ECB)-inspired volatility and the broader market 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 around the major.

Technical levels to watch