The USD/CAD pair struggles to gain any meaningful traction and seesaws between tepid gains/minor losses through the early North American session on Tuesday. The pair is currently placed just above mid-1.3600s, nearly unchanged for the day and is influenced by a combination of diverging forces.
The US Dollar (USD) drifts lower for the second successive day and keeps a lid on USD/CAD pair's modest intraday bounce to the 1.3700 neighbourhood. The Federal Reserve's less hawkish outlook, signalling that a pause to interest rate hikes was on the horizon, along with easing fears of a full-blown banking crisis, continue to weigh the safe-haven Greenback. That said, a modest pullback in Crude Oil prices, from a two-week high touched earlier this Tuesday, undermines the commodity-linked Loonie and acts as a tailwind for the major, at least for the time being.
Despite the latest optimism over a strong recovery in China and worries about supply disruptions in Turkey, worries that a deeper global economic downturn will dent fuel demand act as a headwind for the black liquid. This, along with expectations that the Bank of Canada (BoC) will refrain from raising interest rates any further, supports prospects for some meaningful appreciating move for the USD/CAD pair. That said, a convincing break below the 1.3630 horizontal support will negate the positive outlook and pave the way for a deeper corrective pullback.
Moving ahead, the focus now shifts to the release of the final US Q4 GDP print on Thursday, which will be followed by the monthly Canadian GDP and the Fed's preferred inflation gauge - the Core PCE Price Index - on Friday. In the meantime, the US bond yields and the broader risk sentiment will drive the USD demand. Apart from this, traders will take cues from Oil price dynamics to grab short-term opportunities around the USD/CAD pair. Nevertheless, the fundamental backdrop suggests that the path of least resistance for spot prices is to the upside
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