Ella 
USD/CAD attracted some buying for the second day in a row on Tuesday, building on a good overnight rebound from near three-week lows in the 1.3630-1.3625 area. During the Asian session, a combination of factors pushed USD/CAD back above the 1.3700 mark.
Crude oil prices are hovering near two-month lows hit on Friday amid an uncertain economic outlook, which could weaken fuel demand. That weighed on the commodity-linked Canadian dollar, and coupled with the U.S. dollar’s further rebound from its lowest levels since Sept. 20 in the previous session, was a key factor in USD/CAD’s strength.
A weak U.S. jobs report released on Friday reaffirmed expectations that the Federal Reserve (Fed) will remain on hold for a third consecutive meeting in December. In other words, speeches by Fed officials overnight still increased uncertainty about the Fed’s next policy moves and triggered some subsequent short-covering in the US dollar. In addition, the fall in market risk propensity is also beneficial to safe-haven currencies.
However, investors appear to believe the Fed is done raising interest rates. This is reinforced by a fresh decline in U.S. bond yields, which could curb further gains for U.S. dollar bulls and USD/CAD. Traders may also prefer to wait for speeches from other influential Fed members, including Fed Chairman Jerome Powell, which could provide clues about the Fed’s path to raising interest rates going forward.
Therefore, it would be prudent to wait for strong follow-through buying in USD/CAD before confirming that the short-term downward trend in USD/CAD from around the 1.3900 mark, the highest level since October 2022, is over. Traders now look forward to trade balance data from the United States and Canada. These data, along with USD and oil price moves, will provide USD/CAD some momentum.
