USD/CAD meets with some supply on Tuesday and is pressured by a combination of factors. A further recovery in oil prices underpins the Loonie and exerts pressure amid a softer USD. The downside seems limited as traders look to the US CPI for a fresh impetus ahead of FOMC. The USD/CAD pair comes under some selling pressure during the first half of the European session and drops to a fresh daily low, around the 1.3600 mark in the last hour. Crude oil prices build on the previous day's bounce from the vicinity of the YTD low and scale higher for the second straight session on Tuesday. This, in turn, is seen underpinning the commodity-linked Loonie, which, along with a modest US Dollar downtick, exerts some downward pressure on the USD/CAD pair.
The optimism over the easing of COVID-19 curbs in China remains supportive of the recent recovery in the risk sentiment and continues to weigh on the safe-haven buck. Furthermore, the uncertainty over the Fed's rate hike path acts as a headwind for the US Treasury bond yields and keeps the USD bulls on the defensive.
Traders, however, might refrain from placing aggressive bets ahead of the latest US consumer inflation figures, due for release later during the early North American session. The crucial US CPI report will play a key role in influencing the Fed's policy outlook and help determine the near-term trajectory for the greenback.
The focus will then shift to the outcome of a two-day FOMC monetary policy meeting, scheduled to be announced on Wednesday amid the uncertainty over the US central bank's rate hike path. This makes it prudent to wait for some follow-through selling before positioning for any further depreciating move for the USD/CAD pair.