USD/CAD slides to its lowest level since September, eyes 1.3100 ahead of Canadian CPI/US data

• USD/CAD drifts lower for the second straight day and drops to a fresh YTD low on Tuesday.
• An uptick in Crude Oil prices underpins the Loonie and exerts pressure amid a softer USD.
• Traders now look to the Canadian CPI report and the US macro data for a fresh impetus.

The USD/CAD pair remains under some selling pressure for the second successive day on Tuesday and drops to the 1.3120 area, or its lowest level since September 2022 during the Asian session.

Crude Oil prices edge higher amid worries about potential supply disruptions, led by political instability in Russia, which, to a larger extent, help offset concerns that a global economic downturn will dent fuel demand. This, in turn, is seen underpinning the commodity-linked Loonie, which, along with a modest US Dollar (USD) weakness, exerts some downward pressure on the USD/CAD pair.

The USD Index (DXY), which tracks the Greenback against a basket of currencies, continues with its struggle to make it through the 50-day Simple Moving Average (SMA) and drifts lower for the second straight day. That said, the Federal Reserve's (Fed) hawkish outlook, signalling that borrowing costs may still need to rise as much as 50 bps by the end of this year, lends some support to the buck.

Apart from this, looming recession risks might further contribute to limiting losses for the safe-haven Greenback and act as a tailwind for the USD/CAD pair. Traders might also refrain from placing aggressive bets and prefer to wait for the release of the latest consumer inflation figures from Canada. The crucial CPI report will influence the Bank of Canada's policy outlook and drive the Canadian Dollar.

The US economic docket, meanwhile, features Durable Goods Orders, the Conference Board's Consumer Confidence Index, New Home Sales and Richmond Manufacturing Index. This, along with the broader risk sentiment, could provide a fresh impetus to the safe-haven USD. Apart from this, Oil price dynamics should allow traders to grab short-term opportunities around the USD/CAD pair.

Technical levels to watch