USD/CAD looks vulnerable near multi-week low below 1.3600

• USD/CAD falls to more than three-week lows, though lacks strong tracking.
• Rising oil prices continue to prop up the Loonie and put pressure on it.
• Modest USD strength provides some support for the pair and helps limit losses.

The pair USD/CAD it falls back for the third day in a row after an initial rally towards the 1.3615 area on Wednesday and falls to its lowest level since early March heading into the North American session. The pair, however, managed to bounce a few points in the last hour and is currently trading on modest intraday losses, just below 1.3600.

Oil prices continue a three-day uptrend and climb to two-week highs, which, in turn, prop up the commodity-linked Loonie by putting some downward pressure on the USD/CAD pair. The interruption of some exports from the Iraqi Kurdistan region raised concerns about global supply shortages. This, along with hopes for a strong recovery in fuel demand in China, continues to support oil prices amid falling US crude inventories.

Indeed, market sources, citing figures from the American Petroleum Institute on Tuesday, suggested that US crude stocks fell by 6.1 million barrels last week. Investors now await official US inventory data from the Energy Information Administration to see if they confirm the decline in crude inventories. Meanwhile, easing fears of a full-blown banking crisis continue to support the prevailing risk appetite environment and lend additional support to black liquids.

That being said, the appearance of some US dollar (USD) buying provides some support for the USD/CAD pair and limits the downside, at least for now. The USD rally, meanwhile, lacks an obvious fundamental catalyst and risks fading rather quickly on the less hawkish outlook from the Federal Reserve (Fed). Indeed, the US central bank signaled last week that a pause in interest rate hikes was coming amid the recent banking turmoil.

This, coupled with a further decline in US Treasury yields and a generally positive tone in equity markets, prevents the safe-haven dollar from rallying strongly. The fundamental background suggests that the path of least resistance for the USD/CAD pair is to the downside. The negative outlook is reinforced by the overnight break below the 1.3630 support. Therefore, any recovery attempt could be seen as a selling opportunity.

Technical levels to watch