USD/CAD is holding above the mid-1.3500 level, looking at the 200-day SMA with moderate USD strength

The USD/CAD pair is regaining some popularity due to the growing interest in buying USD.
Low oil prices weaken and further support the Canadian dollar.
Traders are now closely monitoring Bank of Canada Governor Macklem’s speech ahead of Wednesday’s release of the US Consumer Price Index (CPI).

The USD/CAD pair is attracting some buyers during the Asian session on Tuesday, although it lacks continuation and remains confined to the previous day’s trading range. Spot prices are currently hovering around the 1.3565 region, up less than 0.10% on the day and below the 200-day plain moving average (SMA) before modern bets are placed.

Oil prices are struggling to capitalize on an overnight rebound from their lowest level since June 2023 amid concerns about a slowdown in China, the world’s largest importer. Those concerns were fueled by the latest Chinese trade balance data, which showed the country’s imports were flat in August from a 6.6% raise in the previous month, indicating tender domestic demand. Besides, hopes for additional interest rate cuts from the Bank of Canada (BoC), boosted by Friday’s disappointing Canadian jobs data, are undermining the commodity-linked Loonie and acting as a tailwind for USD/CAD.

On the other hand, the US dollar (USD) continues to benefit from lowered bets on a larger 50 basis points (bps) rate cut by the Federal Reserve (Fed) in September following Friday’s mixed US Nonfarm Payrolls (NFP) report. This in turn is seen as another factor providing some support to the USD/CAD pair, although the lack of further buying warrants some caution from bulls ahead of BoC Governor Tiff Macklem’s speech later in the North American session. Investors may also prefer to take a sideline ahead of US inflation data, which will play a key role in influencing the Greenback.

The key US Consumer Price Index (CPI) is due out on Wednesday, followed by the Producer Price Index (PPI) on Thursday. This data will influence market expectations for the size of the Fed’s rate cut later this month and demand for USD. This, along with the dynamics of oil prices, should provide some significant impetus to the USD/CAD pair and aid determine the next stage of the directional move.

Economic indicator

BoC Governor Macklem’s Speech

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