USD/CAD holds above 100-day SMA; looks to build on strength beyond 1.3800

• USD/CAD regains some positive traction on Tuesday, though it lacks bullish conviction.

• Bearish Crude Oil prices undermine the Loonie and support the pair amid a USD uptick.

• Traders opt to wait for more cues about the Fed’s rate-cut path before placing fresh bets.

The USD/CAD pair climbs back above the 1.3800 mark during the Asian session on Tuesday, though it lacks bullish conviction and remains below an over two-week high touched the previous day. Moreover, a combination of diverging forces might hold back traders from positioning for any meaningful appreciating move for spot prices.

Crude Oil prices meet with a fresh supply amid the optimism over planned three-way peace talks between Russia, Ukraine, and the US, which could lead to an end to sanctions on Russian crude. This, along with persistent trade-related uncertainty and the Bank of Canada's (BoC) dovish tilt, undermines the commodity-linked Loonie. Apart from this, a modest US Dollar (USD) uptick acts as a tailwind for the USD/CAD pair.

In fact, US President Donald Trump raised tariffs on Canadian goods from 25% to 35%. Moreover, the White House announced a 40% transshipment tariff on goods rerouted through third countries to avoid the duties. Adding to this,  the BoC left the door open for further interest rate cuts in the coming months. This, in turn, is seen weighing on the Canadian Dollar (CAD) and offering some support to the USD/CAD pair.

Meanwhile, any meaningful USD upside seems elusive amid the growing acceptance that the US Federal Reserve (Fed) will resume its rate-cutting cycle in September. Traders also seem reluctant and opt to wait for more cues about the Fed's rate-cut path. Hence, the focus will remain on the FOMC meeting Minutes, due for release on Wednesday, and Fed Chair Jerome Powell's speech at the Jackson Hole Symposium.

The aforementioned fundamental backdrop makes it prudent to wait for strong follow-through before placing fresh bullish bets around the USD/CAD pair. That said, the emergence of some dip-buying on Tuesday and acceptance above the 100-day Simple Moving Average (SMA) backs the case for some meaningful upside for spot prices. Hence, any corrective pullback could be seen as a buying opportunity and remain limited.