The USDCAD is rangebound below 1.3500 as investors anticipate the US midterm elections

In the early Asian session, the USDCAD pair is fluctuating in a narrow range below the psychological resistance of 1.3500. As investors await the US midterm elections, which will set the stage for the US Consumer Price Index (CPI) data, the asset has moved sideways.

S&P500 posted impressive gains on Monday, while the US dollar index (DXY) was hammered due to the likelihood that the current 75 basis point (bps) rate hike pace will not be maintained for much longer. The DXY has decreased to approximately 110.00, and a Democratic majority victory will further reinforce the bullish risk profile.

The returns on U.S. government bonds, meanwhile, have not been subject to any pressure and continue to rise gradually. At press time, the 10-year US Treasury rates were noted at 4.225.

The struggle for 435 House of Representatives seats and 34 Senate seats will decide the degree of the Democratic party's influence. A Democratic loss in the midterm elections would impair the power of US President Joe Biden, as Republican consent is required for the passage of legislation. This may also contribute to political instability.

According to a report from ANZ Bank, "We view a Republican-controlled Congress as the most likely scenario" Not far behind, at 41%, is a divided Congress, with the House under Republican control and the Senate under Democratic control."

On the Loonie front, investors are expecting the speech of Bank of Canada (BOC) Governor Tiff Macklem, which will provide hints regarding the expected future course of monetary policy. As a result of the Chinese government's commitment to the zero-tolerance Covid-19 policy, oil prices have retreated to roughly $91, following a swift recovery. This has stoked concerns regarding future oil demand.