USD/CAD advances to nearly two-week high, above mid-1.3700s ahead of US data

• USD/CAD attracts follow-through buyers for the fourth consecutive day on Tuesday.
• The ongoing USD positive move and retreating Oil prices act as a tailwind for the pair.
• Traders look to US data for some impetus ahead of the FOMC decision on Wednesday.

The USD/CAD pair prolongs its uptrend for the fourth straight day on Tuesday and climbs to a one-and-a-half-week top, above mid-1.3700s during the early European session. The momentum is sponsored by sustained US Dollar (USD) buying. Adding to this, a modest downtick in Crude Oil prices is seen undermining the commodity-linked Loonie and acting as a tailwind for spot prices.

The upbeat US macro data released last week pointed to a still resilient labor market. Moreover, concerns that higher US tariffs would reignite inflationary pressures in the second half of the year suggest that the Federal Reserve (Fed) would maintain the status quo at the end of a two-day policy meeting on Wednesday. This, in turn, lifts the USD Index (DXY), which tracks the Greenback against a basket of currencies, to over a one-month peak and turns out to be a key factor pushing the USD/CAD pair higher.

Meanwhile, a broadly firmer buck is seen weighing on USD-denominated commodities, including Crude Oil prices. Moreover, US President Donald Trump's punishing 35% tariffs on imports from Canada seem to exert pressure on the Canadian Dollar (CAD) and contribute to the bid tone surrounding the USD/CAD pair. This, in turn, backs the case for a further near-term appreciating move for spot prices, though bulls might refrain from placing fresh bets and wait for more cues about the Fed's rate-cut path.

Hence, the focus will remain glued to the crucial FOMC meeting starting this Tuesday. The US central bank is widely expected to keep interest rates steady. Investors, however, will closely scrutinize the accompanying policy statement and Fed Chair Jerome Powell's comments at the post-meeting press conference. This, in turn, will influence the USD and provide a fresh impetus to the USD/CAD pair. In the meantime, Tuesday's US macro data could produce short-term opportunities later during the North American session.