USD/CAD drops below 1.3350 on decisive oil recovery

• WTI recovers above $47 on Monday, adds nearly 4%.
• US Dollar Index extends slide toward 97 handle.
• Business activity in US manufacturing sector stagnates in February.

The broad-based selling pressure surrounding the USD and a sharp recovery witnessed in crude oil prices caused the USD/CAD pair to turn south on Monday. As of writing, the pair was trading at 1.3336, down 0.45% on a daily basis.

USD selloff continues

Plummetting US Treasury bond yields and heightened odds of a Fed rate cut in March cause the greenback to continue to suffer losses against its rivals. The US Dollar Index, which lost 1.2% last week, is now down 0.9% on the day at 97.24.

Earlier in the day, the data published by the Institue for Supply Management (ISM) showed that the business activity in the US manufacturing sector virtually stagnated with the manufacturing PMI coming in at 50.1 in February.

Previewing the FOMC March meeting, “based on Fed chair Powell’s statement and the current situation, we change our Fed call and now expect the Fed to cut its target range by 25bp in March and again in April,” Danske Bank analysts said. 

On the other hand, the commodity-related CAD is capitalizing on rising crude oil prices on Monday. Boosted by hopes of OPEC+ cutting the oil output by 1 million barrels to battle the negative impact of the coronavirus outbreak on the global energy demand, the WTI rose to a daily high of $47.25. As of writing, the WTI was up 3.7% on the day at $47.

Technical levels to watch for