• USD/CAD edges lower during the Asian session, though it lacks follow-through selling.
• Trump’s tariff threats and weaker Oil prices undermine the Loonie, supporting the pair.
• The divergent BoC-Fed policy expectations warrant caution before placing bullish bets.

The USD/CAD pair struggles to capitalize on the previous day’s goodish recovery from the 1.3800 mark, or its lowest level since September 22, and edges lower during the Asian session on Tuesday. Spot prices currently trade around the 1.3845-1.3850 region, though traders seem reluctant to place aggressive directional bets amid mixed fundamental cues.

The upbeat Canadian employment details released last Friday reaffirmed the Bank of Canada’s (BoC) hawkish outlook, which is seen underpinning the Canadian Dollar (CAD) and weighing on the USD/CAD pair. The upside for the CAD, however, remains capped in the wake of US President Donald Trump’s threat that he could impose fresh tariffs on agricultural products, including Canadian fertilizer and Indian rice.

Adding to this, Crude Oil prices consolidate the previous day’s heavy losses, which, in turn, undermines the commodity-linked Loonie and offers some support to the USD/CAD pair. Bullish traders, however, seem reluctant to place aggressive bets as rising bets for more rate cuts by the US Federal Reserve (Fed) keeps a lid on the recent US Dollar (USD) recovery from its lowest level since late October, touched last week.

Furthermore, investors opt to wait on the sidelines ahead of key central bank event risks – the BoC policy update and the highly-anticipated FOMC rate decision on Wednesday. In the meantime, Tuesday’s US macro data – the ADP Weekly Employment Change and JOLTS Job Openings might provide some impetus. Nevertheless, the divergent BoC-Fed expectations warrant some caution for the USD/CAD bulls.