USD/CAD trades with modest gains around 1.3575-80 area, lacks bullish conviction

• USD/CAD edges higher during the Asian session on Wednesday amid a modest USD strength. 
• Reduced bets for a 50-bps Fed rate cut lift the US bond yields higher and underpin the buck.
• An uptick in Oil prices lends support to the Loonie and keeps a lid on further gains for the pair.

The USD/CAD pair attracts dip-buying during the Asian session on Thursday and for now, seems to have stalled its retracement slide from a three-week top, around the 1.3620-1.3625 area touched the previous day. The intraday uptick, however, lacks bullish conviction, warranting some caution before positioning for any meaningful appreciating move. 

The crucial US Consumer Price Index (CPI) report indicated that consumer prices in the US are easing overall. That said, the core CPI indicated that the underlying inflation remains sticky and dashed hopes for a larger, 50 basis points (bps) rate cut by the Federal Reserve (Fed) next week. This, in turn, leads to an uptick in the US Treasury bond yields, which lifts the US Dollar (USD) back closer to the monthly peak and turns out to be a key factor acting as a tailwind for the USD/CAD pair. 

Meanwhile, the US central bank is almost certain to start its policy easing cycle and lower borrowing costs by 25 bps at the September 17-18 policy meeting. This, along with a generally positive tone around the equity markets, keeps a lid on the safe-haven Greenback. Moreover, a modest pickup in Crude Oil prices underpins the commodity-linked Loonie and contributes to capping the USD/CAD pair, making it prudent to wait for strong follow-through buying before placing fresh bullish bets. 

Market participants now look forward to the release of the US Producer Price Index (PPI) for some impetus later during the early North American session. This, along with the US bond yields and the broader risk sentiment, will drive the USD demand. Apart from this, Oil price dynamics should allow traders to grab short-term opportunities around the USD/CAD pair.