USD/CAD holds steady above mid-1.3500s, looks 200-day SMA amid modest USD strength

• USD/CAD is regaining some positive traction amid some USD buying interest.
• Low crude oil prices undermine the Loonie and provide further support to the major.
• Traders are now looking ahead to BoC Governor Macklem’s speech ahead of Wednesday’s US CPI.

The USD/CAD pair is attracting some buyers during the Asian session on Tuesday, although it lacks a follow-through and remains limited in the previous day’s trading range. Spot prices are currently hovering around the 1.3565 region, up less than 0.10% on the day and below the 200-day simple moving average (SMA) before placing new bets.

Crude oil prices are struggling to capitalize on an overnight rebound from their lowest level since June 2023 amid concerns about a slowdown in China – the world’s biggest importer. Concerns were fueled by China’s latest trade balance data, which showed the country’s imports were flat in August, compared with a 6.6 percent increase in the previous month, pointing to weak domestic demand. Apart from this, hopes of further interest rate cuts by the Bank of Canada (BoC), supported by disappointing Canadian jobs data on Friday, are undermining the commodity-linked Loonie and acting as a tailwind for the USD pair /CAD.

The US dollar (USD), on the other hand, continues to receive support from bearish bets for a further 50 basis point (bps) interest rate cut by the Federal Reserve (Fed) in September, following the publication of Friday of the US Mixed Payrolls. NFP) report. This, in turn, is seen as another factor providing some support to the USD/CAD pair, although the lack of continued buying warrants some caution for bulls ahead of BoC Governor Tiff Macklem’s speech later in the opening session from North America. Investors may also prefer to stay on the sidelines ahead of US inflation numbers, which will play a key role in influencing the greenback.

The crucial US Consumer Price Index (CPI) is due to be released on Wednesday, followed by the Producer Price Index (PPI) on Thursday. The data will boost market expectations about the size of the Fed’s interest rate cut later this month and USD demand. This, along with oil price dynamics, should provide a significant boost to the USD/CAD pair and help determine the next leg of a directional move.