USD/CAD retreats sharply from multi-month tops, plummets to 1.3330 area

• USD/CAD comes under some aggressive selling pressure on the first day of a new week.
• A strong bounce in oil prices underpinned the loonie and prompted some long-unwinding.
• The USD remains on the defensive amid firming expectations for a Fed rate cut in March.

The USD/CAD pair remained under some heavy selling pressure through the early European session and is currently placed near the lower end of its daily trading range, below mid-1.3300s.

Following a weekly bullish gap opening, the pair witnessed a dramatic intraday turnaround and retreated over 100 pips from daily tops. A strong recovery in oil prices provided a goodish lift to the commodity-linked currency – the loonie – and prompted some aggressive long-unwinding trade around the major.

USD/CAD weighed down by a combination of factors

Expectations that OPEC and its allies will deepen output cuts, coupled with a recovery in the global risk sentiment assisted oil prices to stall the recent freefall and stage a goodish intraday bounce from 14-month lows. It is worth reporting that oil plunged 16% last week amid concerns over the coronavirus outbreak.

Meanwhile, speculations of a coordinated interest rate cut by the top central banks turned out to be one of the key factors that helped offset the worries and boosted investors' sentiment on the first day of a new trading week.

On the other hand, firming market expectations that the Fed will cut rates at its upcoming meeting on March 18 to support the economy and offset the risks posed by the coronavirus epidemic continued exerting some pressure on the US dollar, which further contributed to the pair's ongoing pullback from nine-month tops set on Friday.

Moving ahead, market participants now look forward to the release of US ISM Manufacturing PMI, which might influence the USD price dynamics and produce some meaningful trading opportunities later during the early North-American session on Monday.

Technical levels to watch