USD/CAD oscillates in trading range above 1.3600, investors await Powell’s testimony

• USD/CAD remains capped within a trading range near 1.3635 in Tuesday’s early Asian session. 
• Loosening US labor market triggered the Fed rate cut expectation this year. 
• Lower crude oil prices weigh on the Loonie. 

The USD/CAD pair oscillates in a narrow trading range around 1.3635 during the early Asian session on Tuesday. Traders prefer to wait on the sidelines ahead of Powell’s semi-annual testimonies and key US data. Additionally, the Federal Reserve’s (Fed) Michael Barr and Michelle Bowman are set to speak later on Tuesday.

Meanwhile, the USD Index (DXY) hovers around the 105.00 barrier despite lower US bond yields. The recent US employment report for June hinted that the labour market in the United States is cooling sharply, triggering the expectation that the US Fed could lower its borrowing costs sooner than expected this year. This, in turn, is likely to weigh on the Greenback. Investors have priced in nearly 76% odds of a Fed rate cut in September, up from 71% last Friday, according to the CME FedWatch tool. 

On the CAD’s front, weakening Canadian employment on Friday raised expectations for rate cuts from the Bank of Canada (BoC). Canada's Unemployment Rate rose to 6.4% in June from 6.2% in May, according to Statistics Canada.  

Meanwhile, crude oil prices edge lower in response to growing peace talks in the Middle East, exerting some selling pressure on the commodity-linked Canadian Dollar (CAD) as Canada is the major crude oil exporter to the United States.