USD/CAD advances to near two-week top, bullish Oil prices to cap gains ahead of US data

• USD/CAD gains positive traction for the fourth straight day amid a modest USD uptick.
• Bullish Crude Oil prices could underpin the Loonie and keep a lid on any further gains.
• The prelim US Q4 GDP could provide some impetus ahead of US PCE data on Thursday.

The USD/CAD pair scales higher for the fourth successive day on Wednesday and climbs to a nearly two-week high, around the 1.3545 region during the Asian session. The positive move is exclusively sponsored by a modest pickup in the US Dollar (USD) demand, though bullish Crude Oil prices might keep a lid on any further gains.

The initial market reaction to Tuesday's disappointing US Durable Goods Orders fades rather quickly amid growing acceptance that the Federal Reserve (Fed) will keep interest rates higher for longer. This, in turn, assists the USD Index (DXY), which tracks the Greenback against a basket of currencies, to build on the overnight bounce from a technically significant 200-day Simple Moving Average (SMA) and acts as a tailwind for the USD/CAD pair.

That said, the looming US government shutdown, along with a fresh leg down in the US Treasury bond yields and the risk-on rally across the global equity markets, could act as a headwind for the safe-haven buck. Meanwhile, Crude Oil prices stand tall near the monthly peak touched on Tuesday and underpin the commodity-linked Loonie. This could further contribute to capping gains for the USD/CAD pair and warrants caution for bullish traders.

Talks of an extension to production cuts from OPEC+ come on top of attacks on ships in the Red Sea by Iran-aligned Houthis in Yemen and continue to lend support to Crude Oil prices. This, in turn, could underpin the commodity-linked Loonie and keep a lid on any further appreciating move for the USD/CAD pair. Traders might also prefer to wait on the sidelines ahead of the US Personal Consumption Expenditures Price Index on Thursday.

The crucial US inflation data should provide fresh cues about the Fed's rate-cut path, which, in turn, will drive the USD demand and help in determining the next leg of a directional move for the USD/CAD pair. In the meantime, traders will take cues from the release of the Prelim US Q4 GDP print, which, along with speeches by influential FOMC members, might produce short-term opportunities later during the North American session.