USD/CAD Rebounds Amid Middle East Tensions

The Canadian Dollar has trimmed its gains against the US Dollar despite higher Oil prices. The USD/CAD pair has rebounded to around 1.3790, down 0.18% on the day, after hitting an intraday low of 1.3760. Risk aversion is supporting the US Dollar due to escalating tensions in the Middle East, which are limiting the Canadian Dollar's advance.

The prolonged conflict between the United States and Iran has now lasted six months and is increasing investor caution. Iranian authorities have threatened to target energy infrastructure across the Gulf, including US Oil and Gas interests, if further attacks against Iran occur. This has led to a demand for safe-haven assets, providing some support to the US Dollar.

Higher Oil prices are providing support to the Canadian Dollar as Crude Oil is one of Canada's main exports. However, this upside is limited by risk aversion and market sentiment remains fragile on Tuesday. Investors are awaiting the release of the US Consumer Price Index (CPI) on Friday, which could provide fresh clues about the Federal Reserve's monetary policy outlook and determine the US Dollar's next directional move.