USD/CAD slides to fresh weekly low, further below 1.3500 amid an uptick in Oil prices

• USD/CAD attracts sellers for the second straight day, though the downside seems limited.
• Oil prices rise amid Middle East tensions and underpin the Loonie, weighing on the major. 
• Reduced bets for a 50 bps Fed rate cut in November lend support to the USD and the pair.

The USD/CAD pair extends the previous day's retracement slide from the 1.3535-1.3540 region, or a one-week high and remains under some selling pressure for the second straight day on Wednesday. The downfall drags spot prices to the 1.3475 area during the Asian session and is sponsored by a modest uptick in Crude Oil prices.

Fears of a full-out war in the Middle East escalated after Iran fired ballistic missiles at Israel on Tuesday in retaliation to the latter's campaign against its Hezbollah allies in Lebanon. Meanwhile, Israeli Prime Minister Benjamin Netanyahu promised that Iran would pay for its missile attack. An Israeli attack on Iran's oil facilities could disrupt oil supply from the key producing region and act as a tailwind for the black liquid, which underpins the commodity-linked Loonie and exerts downward pressure on the USD/CAD pair. 

The US Dollar (USD), on the other hand, continues to draw support from diminishing odds for a more aggressive policy easing by the Federal Reserve (Fed) and Tuesday's US macro data, indicating a resilient labor market. The Fed Chair Jerome Powell said on Monday that he sees two more 25 bps rate cuts this year as a baseline if the economy performs as expected. Adding to this, the Job Openings and Labor Turnover Survey (JOLTS) showed that the number of job openings unexpectedly increased in August and stood at 8.04 million. 

This, in turn, assists the USD to preserve its strong recovery gains registered over the past two days and might hold back traders from placing aggressive bearish bets around the USD/CAD pair. Apart from this, expectations for a bigger interest rate cut by the Bank of Canada (BoC) should cap gains for the Canadian Dollar (CAD) and contribute to limiting losses for the currency pair. This makes it prudent to wait for strong follow-through selling before confirming that the recent bounce from a multi-month low has run out of steam.

Investors now look forward to the release of the US ADP report on private-sector employment, which, along with geopolitical developments, will drive the USD demand. Apart from this, Oil price dynamics might provide some impetus to the USD/CAD pair and allow traders to grab short-term opportunities. The focus, however, will remain glued to the closely-watched US monthly employment details, popularly known as the Nonfarm Payrolls (NFP) report on Friday.