• USD/CAD struggles to gain any meaningful traction as traders keenly await Trump’s SOTU speech.
• Geopolitical risks act as a tailwind for Oil prices, underpinning the Loonie and capping spot prices.
• The Fed’s hawkish tilt assists the USD in preserving the overnight gains and lends support to the pair.

The USD/CAD pair trades with a mild negative bias during the Asian session on Wednesday, though it lacks bearish conviction and remains close to the monthly peak touched the previous day. Spot prices currently trade just below the 1.3700 mark, down 0.05% for the day, as traders refrain from placing aggressive directional bets ahead of US President Donald Trump's speech.

Trump will deliver the first State of the Union address of his second term at 02:00 GMT and is expected to focus on the economy amid concerns about the fallout from persistent trade-related uncertainties. Trump's speech will also involve Iran ahead of the third round of nuclear talks on Thursday. This will play a key role in driving the US Dollar (USD) demand and influencing Oil price dynamics, which, in turn, should provide some meaningful impetus to the USD/CAD pair.

In the meantime, the risk of a US military strike on Iran acts as a tailwind for Crude Oil prices ahead of the third round of nuclear talks on Thursday. This is seen underpinning the commodity-linked Loonie and capping the upside for the currency pair. That said, overnight hawkish comments from a slew of Federal Reserve (Fed) officials assist the USD to hold steady below its highest level since January 23, touched last week, which, in turn, limits the downside for the USD/CAD pair.

Later during the North American session, traders will continue to take cues from Fed speak to grab short-term opportunities. The aforementioned mixed fundamental backdrop, meanwhile, warrants caution before placing aggressive directional bets. Even from a technical perspective, it will be prudent to wait for a breakout through the recent range-bound price action witnessed over the past week or so before determining a firm near-term trajectory for the USD/CAD pair.