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During Tuesday's early Asian session, the USD/CAD pair halts the previous day's pullback and obtains traction below the 1.3200 threshold. The US Dollar Index (DXY), a measure of the Greenback's value relative to a basket of six major currencies, is gaining ground near 101.95, gaining 0.08% on the day. Market participants await the US ISM Manufacturing Purchasing Managers Index (PMI) data later in the North American session ahead of Friday's Canadian employment data and US Nonfarm Payrolls.

The United States released low-tier economic data on Monday. The US Chicago Purchasing Managers Index (PMI) rose to 42.8 in July from 41.5 in June, exceeding market expectations of 43, while the Dallas Manufacturing Index rose to -20 from -23.2 in July.

The evidence of easing fundamental price pressures in the United States could persuade the Federal Reserve to adopt a less hawkish stance. In spite of this, the Personal Consumption Expenditures (PCE) Price Index fell from 3.8% in May to 3% in June, which was below the market's expectation of 3.1%. Annually, the Core PCE Price Index was 4.1%, down from 4.6% in May and below market expectations of 4.2%. The Federal Reserve (Fed) may be closer to the end of its rate-hiking cycle as a result of the weaker data. This may limit the upside potential of the US Dollar and function as a headwind for USD/CAD.

On the subject of the Canadian dollar, Bank of Canada (BoC) policymakers indicated they are still likely to raise their benchmark interest rate further after increasing it by 25 basis points (bps) to 5.0 percent on July 12. Tiff Macklem, governor of the Bank of Canada, revealed that future policy decisions would be based on incoming data and the inflation outlook. However, market participants anticipated that the Bank of Canada (BoC) would not deem a further increase in interest rates necessary this year.

The Canadian Gross Domestic Product (GDP) increased by 0.3% in May, as anticipated. However, the number is anticipated to decrease in June, indicating a national economic slowdown. This may signify the end of the Bank of Canada's (BoC) tightening cycle, which has pushed interest rates to their highest level in 22 years.

In the meantime, the rise in energy prices has bolstered the Canadian dollar and offset a slowdown in the manufacturing sector. As the primary oil exporter to the United States, Canada's currency benefits from an increase in crude oil prices.

Investors anticipate the US ISM Manufacturing Purchasing Managers Index (PMI) data later in the day. On Friday, the focus will transition to employment data and Nonfarm payrolls in Canada. It is anticipated that the US economy has created 180,000 employment. This week will also see the release of the JOLTS Job Openings report, ADP Private Employment, Weekly Jobless Claims, and Unit Labour Cost. The data will be essential for determining a definitive USD/CAD movement.

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