CAD Gains on Middle East Tensions and Higher Oil Prices

The Canadian Dollar (CAD) gained ground on Wednesday as tensions in the Middle East boosted oil prices, which have a positive impact on the CAD. The USD/CAD pair declined to around 1.3770 during the early European session.

The recent US strike on Iranian tankers and attacks on Saudi infrastructure led to higher crude oil prices, lifting the commodity-linked CAD. Strategists at National Bank of Canada note that renewed geopolitical strains are reinforcing support for the Canadian Dollar, keeping a geopolitical risk premium embedded in both oil and gold.

The technical analysis shows that USD/CAD maintains a negative outlook under the 100-day Simple Moving Average (SMA), with the pair holding below a dense band of moving-average and Bollinger resistance. The Relative Strength Index (14) around 38 stays in bearish territory, hinting that downside pressure persists.

The US Producer Price Index (PPI) and Consumer Price Index (CPI) inflation data will be key highlights later this week, offering hints about the US interest rate path. Hotter-than-expected inflation readings could reinforce a Federal Reserve (Fed) interest rate hike at the September policy meeting, limiting the Greenback's losses.