USD/CAD attracts some buyers amid a modest USD uptick, though the upside potential seems limited
Recovering Oil prices underpin the Loonie and cap the pair amid hopes for a US-Canada trade deal.
Traders also seem reluctant and opt to wait for the crucial FOMC policy decision on Wednesday.
The USD/CAD pair edges higher for the second consecutive day on Tuesday, though it lacks strong follow-through buying and remains confined in a familiar range held over the past two weeks or so. Spot prices currently trade around the 1.3830 region, up less than 0.5% for the day amid a combination of diverging forces.
The US Dollar (USD) gains some positive traction following a two-day losing streak on the back of Monday's upbeat release of the US ISM Services PMI, which, in turn, acts as a tailwind for the USD/CAD pair. However, persistent economic uncertainty led by US President Donald Trump's erratic trade policies hold back the USD bulls from placing aggressive bets.
Meanwhile, Crude Oil prices look to build on the overnight bounce from a nearly one-month low. Adding to this hopes for a US-Canada trade deal underpin the commodity-linked Loonie and contribute to capping the USD/CAD pair. In fact, Trump said that Canadian Prime Minister Mark Carney is looking to make a trade deal and will visit the White House this week.
Investors also seem reluctant and opt to wait for more cues about the Federal Reserve's (Fed) rate-cut path before positioning for the next leg of the directional move for the Greenback and the USD/CAD pair. Hence, the focus will remain on the outcome of the highly-anticipated two-day FOMC monetary policy meeting, scheduled to be announced on Wednesday.
Heading into the key central bank event risk, the incoming US macro data seems to have eased market recession fears. This, in turn, could offer some support to the buck and the USD/CAD pair. Nevertheless, spot prices remain within striking distance of the lowest level since October 2024 touched last Friday, and seem vulnerable to extending a well-established downtrend.
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