USD/CAD attracts some buyers to near 1.3650 as crude oil prices fall

• USD/CAD gains ground to around 1.3650 in Monday’s early European session.

• Lower crude oil prices weigh on the commodity-linked Loonie and act as a tailwind for the pair. 

• Traders await the FOMC Minutes later on Wednesday for fresh impetus. 

The USD/CAD pair extends the rally to near 1.3650 during the early European trading hours on Monday, bolstered by a decline in Oil prices. Meanwhile, traders will closely monitor any trade-related headlines in the countdown to US President Donald Trump's tariff deadline. On Wednesday, the Federal Open Market Committee (FOMC) Minutes will be in the spotlight. 

The Trump administration is putting pressure on trade partners to reach new agreements by a Wednesday deadline. Letters will be sent on Monday, warning nations that higher tariffs may be imposed on August 1. The tariff uncertainty could weigh on the risk-sensitive assets like the Canadian Dollar (CAD) and create a tailwind for the pair. 

The upbeat US June Nonfarm Payrolls (NFP) released on Thursday reduced the possibility of the US Federal Reserve’s (Fed) near-term monetary accommodation. This report has provided some support to the Greenback against the CAD. According to the CME FedWatch tool, the likelihood of a July reduction is declining from 25% to less than 5%.  

Meanwhile, a fall in Crude Oil prices after the Organization of the Petroleum Exporting Countries and allies (OPEC+) agreed to a bigger-than-expected production increase in August could weigh on the commodity-linked Loonie. It’s worth noting that Canada is the largest oil exporter to the US, and lower crude oil prices tend to have a negative impact on the CAD value.  

Traders will keep an eye on the release of the FOMC Minutes on Wednesday, as it might offer insight into how Fed officials view the US economy. Any dovish remarks from the Fed policymakers might cap the upside for the USD against the Loonie.