• USD/CAD continues with its struggle to gain any meaningful traction amid mixed cues.
• The USD languishes near the YTD low amid dovish Fed expectations and cap the upside.
• A downtick in Crude Oil prices undermines the Loonie and acts as a tailwind for the pair.

The USD/CAD pair extends its sideways consolidative price move on Tuesday and remains confined in a familiar range held over the past week or so. Spot prices, meanwhile, remain below the 1.3600 mark through the early European session amid a bearish US Dollar (USD), though the downside seems cushioned ahead of the key central bank event risk.

The markets are now pricing in a greater chance of an oversized interest rate cut by the Federal Reserve (Fed) amid signs that inflation in the US was subsiding. This, in turn, drags the US Treasury bond yields to one or two-year lows, which, along with the upbeat market mood, keeps the USD depressed near the 2024 trough touched on Monday and acts as a headwind for the USD/CAD pair. 

That said, a modest pullback in Crude Oil prices from a nearly two-week high and bets for additional interest rate cuts by the Bank of Canada (BoC) undermines the commodity-linked Loonie. This could hold back traders from placing aggressive bearish bets around the USD/CAD pair and help limit deeper losses ahead of the Canadian consumer inflation figures, due later this Tuesday.

From a technical perspective, the recent repeated failures to find acceptance above the 1.3600 mark favor bearish traders. That said, the range-bound price action around the very important 200-day Simple Moving Average (SMA) constitutes the formation of a rectangle and marks a consolidation phase. Moreover, neutral oscillators on the daily chart warrant some caution before placing directional bets.