USD/CAD hangs near daily low, around 1.4000 amid modest uptick in Oil prices

• USD/CAD attracts some sellers on Tuesday and is pressured by a combination of factors.
• An uptick in Oil prices underpins the Loonie and weighs on the pair amid a softer USD.
• The downside, however, seems limited as traders seem reluctant ahead of the US data.

The USD/CAD pair extends the previous day's late pullback from the vicinity of the 1.4100 mark and continues losing ground through the first half of the European session on Tuesday. The intraday slide is sponsored by a combination of factors and drags spot prices closer to the 1.4000 psychological mark in the last hour.

Despite a ceasefire deal between Israel and the Lebanon-based Hezbollah militant group, geopolitical risk premium remains in play amid the worsening Russia-Ukraine conflict. Apart from this, expectations that the Organization of Petroleum Exporting Countries and allies (OPEC+) would further delay plans to increase production lend support to Crude Oil prices for the second straight day. This, along with reduced bets for a bigger rate cut by the Bank of Canada (BoC) in December, undermines the commodity-linked Loonie and exerts some pressure on the USD/CAD pair amid a modest US Dollar (USD) downtick.

The USD Index (DXY), which tracks the Greenback against a basket of currencies, fails to build on the overnight bounce from a nearly three-week low amid a greater chance that the Federal Reserve (Fed) will cut rates in December. Investors, however, seem convinced that US President-elect Donald Trump's expansionary policies will reignite inflationary pressures and force the Fed to keep rates higher for a longer period. This, in turn, provides a modest lift to the US bond yields and lends support to the USD. Apart from this, concerns about Trump's tariff plans should cap the Canadian Dollar (CAD) and the USD/CAD pair.

Traders now look to the release of the US JOLTS Job Openings for short-term opportunities later during the North American session. Apart from this, this week's important US macro data, including the closely watched Nonfarm Payrolls (NFP) report, and Fed Chair Jerome Powell's speech should provide some cues about the interest rate outlook in the US. This, in turn, will play a key role in driving the USD demand and provide some meaningful impetus to the USD/CAD pair. Investors will also keep a close eye on the crucial OPEC+ meeting on Thursday, which should influence Oil price dynamics in the near term.