USD/CAD holds below 1.3500 amid dovish Fed, higher crude oil prices

• USD/CAD remains on the defensive near 1.3485 in Tuesday's early Asian session. 
• Fed's Daly believes it's appropriate for the Fed to begin cutting interest rates.
• Higher crude oil prices support the CAD and create a headwind for USD/CAD. 

The USD/CAD pair extends downside around 1.3485 during the early Asian session on Tuesday. Escalating geopolitical tensions in the Middle East provide some support to the commodity-linked Canadian Dollar (CAD) and weigh on USD/CAD. Later on Tuesday,  the US Conference Board's Consumer Confidence is due. 

Federal Reserve (Fed) Bank of San Francisco President Mary Daly's remarks on Monday echoed comments from Fed Chair Jerome Powell at the Jackson Hole symposium, who said that he has gained confidence that inflation is on course to the 2% target and "the time has come for policy to adjust." Fed's Daly noted that she believes it's appropriate for the Fed to begin cutting interest rates. This, in turn, continues to undermine the US Dollar (USD) against the Loonie. 

According to the CME FedWatch Tool, the markets have fully priced in a 25 basis points (bps) rate cut, while the possibility of a deeper rate cut stands at 30%, down from 36.5 % last Friday.

Elsewhere, data released by the US Census Bureau on Monday showed that the US Durable Goods Orders climbed to 9.9% MoM in July from a -6.9% contraction in June. This figure came in better than the estimation of a 4% increase and registered the most significant gain since May 2020. The Greenback posted modest gains in an immediate reaction to the upbeat data. 

On the Loonie front, the fear of wider conflicts in the Middle East and prospects of supply disruptions in Libya boost the crude oil prices and lift the CAD. It's worth noting that higher crude oil prices are likely to underpin the Loonie for the time being, as Canada is the leading exporter of Oil to the United States.