Ella 
In the Asian market on Tuesday, USD/CAD attracted some buyers, but lacked follow-up and remained within the previous day’s shock range. Ahead of investors launching new bets, USD/CAD is currently hovering around 1.3565, up less than 0.10% for the day and encountering resistance at the 200-day simple moving average (SMA).
Overnight crude oil prices rebounded from their lowest levels since June 2023, but struggled to strengthen amid worries about an economic slowdown in China, the world’s largest importer. Worries were heightened by China’s latest trade balance data, which showed China’s imports were flat in August from the previous month after rising 6.6% in a sign of weakening domestic demand. On top of this, weak Canadian employment data on Friday bolstered hopes of further interest rate cuts from the Bank of Canada (BoC), weighing on the commodity-linked Canadian dollar and boosting USD/CAD.
On the other hand, the U.S. non-farm payrolls data released last Friday was mixed, with the market reducing bets that the Federal Reserve (Fed) will cut interest rates by 50 basis points (bps) in September, continuing to provide support for the US dollar (USD). . This is therefore seen as another factor boosting USD/CAD, although bulls will still need to be cautious despite the lack of follow-through buying ahead of Bank of Canada Governor McCallum’s speech later in the early US session. Investors may also choose to wait and see before the release of US inflation data, because the inflation data will have a key impact on the trend of the USD/CAD.
The all-important US Consumer Price Index (CPI) will be released on Wednesday, and the Producer Price Index (PPI) will be released on Thursday. The data will boost market expectations for a rate cut by the Federal Reserve later this month and demand for the dollar. This, along with the oil swings, will provide some significant momentum to the USD/CAD pair and help determine which direction USD/CAD goes next.
