USD/CAD continued its upward momentum during Tuesday's Asian session, trading near 1.3750. The primary driver behind the dollar's strength stems from last week's US July PCE price index data, which revealed persistent inflationary pressures and created market uncertainty regarding the Federal Reserve's September rate cut plans.

Later today, the August ISM Manufacturing PMI will be released, with investors closely monitoring its potential impact on dollar direction.

Despite the dollar's recent strength, its upward momentum may face limitations. The CME FedWatch tool indicates that the probability of a 25 basis point Fed rate cut in September has risen to 89%, up from 84% last week.

Additionally, this week will see the sequential release of US ADP employment change, average hourly earnings, and non-farm payroll data, which will further influence dollar trends and USD/CAD's short-term direction.

On the Canadian dollar front, Canada's economic performance has fallen short of expectations. Statistics Canada data revealed that second-quarter real GDP contracted 0.4% quarter-over-quarter, with weak exports and business investment being the primary factors.

Furthermore, US-Canada trade frictions and Trump's tariff policies continue to exert pressure on the economy. These factors have led markets to anticipate that the Bank of Canada may ease monetary policy ahead of schedule, thereby providing support for USD/CAD.

Market Analysis: USD/CAD faces short-term upward pressure driven by dual factors: US inflation pressures and Canadian economic deceleration, creating an overall bullish bias. In the near term, if US employment data proves robust, the dollar may advance further. However, if the data disappoints, increased rate cut expectations could limit dollar upside momentum, potentially causing USD/CAD to trade within the 1.3700-1.3800 range. Attention should be focused on Federal Reserve policy developments and Canadian economic data to assess future directional moves.