USDCAD falls towards 1.3250 amid fresh selling around the dollar

• USDCAD comes under fresh selling pressure on Tuesday amid modest dollar weakness.
• Bearish crude oil prices could weigh on the CAD and help limit the pair’s decline.
• Investors expect US macro data and FOMC members’ speeches to provide further impetus.

The USDCAD fails to capitalize on the previous day’s bounce from the support of the 100-day SMA and finds new selling near the 1.3325 area on Tuesday. The pair maintains its sales tone throughout the European session, although currently bouncing slightly from daily lows of 1.3250.

The US dollar is under new selling pressure amid the rising expectations for a less aggressive Fed policy. In fact, Fed funds futures give a 91% chance of a 50 basis point rate hike at the next FOMC meeting in December. This, along with a generally positive tone around the stock marketsis seen as another factor weighing on the safe haven dollar and putting some downward pressure on the USDCAD pair.

However, the decline appears to be cushioned by the slightly negative sentiment surrounding crude oil prices. Rising COVID-19 cases in China raise fears of lower fuel consumption in the world’s top crude oil importer. This comes after OPEC lowered its 2022 global demand forecast and continues to act as a headwind for black gold, which could weigh on commodity-linked CAD and support USDCAD.

The mixed fundamental background warrants some caution for aggressive traders before positioning for a firm direction in the short term. Now traders are looking at US macroeconomic data, with the release of the Empire State Manufacturing Index and the Producer Price Index (PPI). This, along with speeches from influential FOMC members and US bond yields, will boost demand for the dollar. Furthermore, the dynamics of oil prices should give a new impetus to the USDCAD pair.

USDCAD technical levels