• USD/CAD reverses an early dip to 1.3700, though the upside potential seems limited.
• The US political uncertainty and dovish Fed bets keep the USD bulls on the defensive.
• An uptick in Oil prices underpins the Loonie and contributes to capping for the major.

The USD/CAD pair attracts some dip-buying following an Asian session uptick to the 1.3700 neighborhood, albeit lacks follow-through and remains below a nearly three-week low touched on Friday. Spot prices currently trade around the 1.3725-1.3730 region – unchanged for the day – and the directionless intraday price move is sponsored by a combination of diverging forces.

The initial market reaction to US President Joe Biden's exit from the presidential race turned out to be short-lived, which is evident from a modest US Dollar (USD) bounce. This turns out to be a key factor acting as a tailwind for the USD/CAD pair. That said, dovish Federal Reserve (Fed) expectations hold back traders from placing aggressive bullish bets around the Greenback and cap the upside for the currency pair. 

Investors now seem convinced that the US central bank will lower borrowing costs in September and have been pricing in two more rate cuts by year-end, which is anticipated to boost economic activity and fuel demand. This assists Crude Oil prices in reversing a part of Friday's heavy losses to a one-month low, underpinning the commodity-linked Loonie and contributing to keeping a lid on the USD/CAD pair