The USD/CAD remains stable above the mid-1.3500s, with attention focused on the 200-day SMA, as the USD shows moderate strength

During the Asian session on Tuesday, the USD/CAD pair attracted some buying interest, though it lacked momentum and remained within the previous day's trading range. Currently, spot prices hover around 1.3565, showing a slight increase of less than 0.10% for the day and staying below the 200-day Simple Moving Average (SMA) as traders await fresh developments.

Crude Oil prices are struggling to build on their recent rebound from the lowest level since June 2023, driven by concerns over a slowdown in China, the world’s largest importer. The latest Chinese Trade Balance data revealed flat imports in August compared to the 6.6% growth in the previous month, indicating weak domestic demand. Additionally, expectations of further interest rate cuts by the Bank of Canada (BoC), following disappointing Canadian jobs data on Friday, are weakening the commodity-linked Loonie and supporting the USD/CAD pair.

Conversely, the US Dollar (USD) is gaining support due to reduced speculation about a larger 50 basis points (bps) interest rate cut by the Federal Reserve (Fed) in September, following a mixed US Nonfarm Payrolls (NFP) report on Friday. This factor is also supporting the USD/CAD pair. However, the lack of strong buying pressure calls for caution among bulls ahead of BoC Governor Tiff Macklem's speech during the early North American session. Investors may also choose to stay on the sidelines ahead of key US inflation data, which will significantly influence the USD.

The crucial US Consumer Price Index (CPI) is set for release on Wednesday, followed by the Producer Price Index (PPI) on Thursday. These data points will shape market expectations regarding the Fed's interest rate decisions and impact USD demand. Combined with oil price movements, these factors will likely provide substantial direction for the USD/CAD pair in the near term.