USD/CAD depreciates toward 1.3850, possibly due to stable Oil prices on US election day

• USD/CAD loses ground amid increased uncertainty surrounding the US presidential election.
• Improved US Treasury yields could limit the downside of the US Dollar.
• Traders will likely observe the BoC Summary of Deliberations and the Ivey PMI data to gain ideas on policy outlook.

USD/CAD extends its losses for the second successive session, trading around 1.3880 during European hours on Tuesday. The commodity-linked Canadian Dollar (CAD) might have received support from the steady Oil prices as Canada is the largest Oil exporter to the United States (USD).

West Texas Intermediate (WTI) Oil price maintains its position around $71.50 per barrel at the time of writing. Crude Oil prices remain steady as traders adopt caution amid increased uncertainties surrounding the results of the US presidential election on Tuesday.

Former President Donald Trump and Vice President Kamala Harris both predicted victory as they campaigned across Pennsylvania on Monday in the final, frantic day of an exceptionally close US presidential election.

The opinion polls show that Trump and Harris are virtually even. The final winner may not be known for days after Tuesday's vote. Trump has already indicated he may challenge any unfavorable result, as he did in 2020.

The US Dollar (USD) receives downward pressure ahead of the US election. However, improved US Treasury yields may limit the downside risk of the Greenback. The US Dollar Index (DXY), which measures the value of the US Dollar against its six major peers, trades around 103.80 with 2-year and 10-year yields on US Treasury bonds standing at 4.17% and 4.30%, respectively, at the time of writing.

On the CAD front, the Bank of Canada (BoC) is anticipated to implement a substantial rate cut at its final monetary policy meeting of the year in December. BoC Governor Tiff Macklem has indicated the possibility of another 50 basis points (bps) rate reduction.

Traders are expected to focus on Canada's International Merchandise Trade data, including Imports and Exports, scheduled for release on Tuesday. On Wednesday, attention will shift to the BoC Summary of Deliberations and the Ivey Purchasing Managers Index (PMI) data.