USD/CAD holds steady above mid-1.3500s, eyes 200-day SMA amid modest USD strength

USD/CAD regains some positive traction amid some follow-through USD buying interest.
Subdued Crude Oil prices undermine the Loonie and further lend support to the major.
Traders now look to BoC Governor Macklem’s speech ahead of the US CPI on Wednesday.

The USD/CAD pair attracts some buyers during the Asian session on Tuesday, albeit lacks follow-through and remains confined in the previous day’s trading range. Spot prices currently hover around the 1.3565 region, up less than 0.10% for the day and below the 200-day Simple Moving Average (SMA) before placing fresh bets.

Crude Oil prices struggle to capitalize on the overnight bounce from the lowest level since June 2023 amid concerns about a slowdown in China – the world’s largest importer. The worries were fueled by the latest Chinese Trade Balance data, which showed that the country’s imports remained flat in August as compared to the 6.6% growth registered in the previous month, pointing to weak domestic demand. Apart from this, hopes for additional interest rate cuts by the Bank of Canada (BoC), bolstered by Friday’s disappointing Canadian jobs data, undermine the commodity-linked Loonie and act as a tailwind for the USD/CAD pair.

The US Dollar (USD), on the other hand, continues to draw support from reduced bets for a larger 50 basis points (bps) interest rate cut by the Federal Reserve (Fed) in September following Friday’s release of the mixed US Nonfarm Payrolls (NFP) report. This, in turn, is seen as another factor lending some support to the USD/CAD pair, though the lack of follow-through buying warrants some caution for bulls ahead of BoC Governor Tiff Macklem’s speech later during the early North American session. Investors might also prefer to move to the sidelines ahead of the US inflation figures, which will play a key role in influencing the Greenback.

The crucial US Consumer Price Index (CPI) is due for release on Wednesday, followed by the Producer Price Index (PPI) on Thursday. The data will drive market expectations about the size of the Fed’s interest rate cut later this month and the USD demand. This, along with Oil price dynamics, should provide some meaningful impetus to the USD/CAD pair and help in determining the next leg of a directional move.

Economic Indicator

BoC’s Governor Macklem speech

Tiff Macklem was appointed Governor of the Bank of Canada, effective 3 June 2020. As Governor, he is also Chairman of the Board of Directors of the Bank. Prior to being appointed as BoC chief, Macklem served as the Dean of the Rotman School of Management at the University of Toronto for six years. He had already served as Senior Deputy Governor of the Bank of Canada from July 2010 until May 2014. Macklem also was the first Chair of the Financial Stability Board’s Standing Committee for Standards Implementation from 2009 to 2013, and represented the Bank of Canada at the FSB.