USD/CAD holds steady above mid-1.4300s; seems vulnerable amid bearish USD

USD/CAD oscillates in a range near the lower end of a short-term trading range.

Rising Oil prices underpin the Loonie and caps spot prices amid a bearish USD. 

Rising bets that the Fed will cut rates several times in 2025 weigh on the buck.

The USD/CAD pair kicks off the new week on a subdued note and oscillates in a narrow band above mid-1.4300s, or the lower end of a one-week-old trading range, during the Asian session. Meanwhile, the fundamental backdrop suggests that the path of least resistance for spot prices is to the downside. 

Against the backdrop of positive news coming out of the US-Canada trade talk last week, a bullish spike in Crude Oil prices is seen underpinning the commodity-linked Loonie. In fact, the commodity touches a two-week high in reaction to the risk of a further escalation of tensions in the Red Sea, especially after the US vowed to continue strikes against Yemen’s Houthis until their attacks ceased. This, along with the underlying bearish sentiment surrounding the US Dollar (USD), validates the near-term negative outlook for the USD/CAD pair. 

The USD Index (DXY), which tracks the Greenback against a basket of currencies, languishes near a multi-month low amid worries that US President Donald Trump's tariffs and retaliatory measures from other countries could hurt the US economy. Adding to this, softer-than-expected US inflation and signs of a cooling US labor market might force the Federal Reserve (Fed) to cut interest rates several times this year. This keeps the USD bulls on the defensive and should further contribute to capping any attempted recovery for the USD/CAD pair. 

Traders now look forward to the US economic docket – featuring the release of monthly Retail Sales and the Empire State Manufacturing Index – for some impetus later during the North American session. The focus, however, will remain glued to the outcome of the highly-anticipated two-day FOMC policy meeting on Wednesday. This will play a key role in influencing the USD and provide a fresh directional impetus to the USD/CAD pair. In the meantime, bears might wait for weakness below the 1.4350 support before placing fresh bets.