Canadian Dollar gains ground as Middle East tensions boost oil prices

The Canadian Dollar (CAD) gained strength on Wednesday due to rising oil prices, which were triggered by US strikes on Iranian tankers and Saudi infrastructure. Traders closely watched the upcoming US inflation reports for further clues regarding the Federal Reserve's interest rate path. Canada, being a significant oil exporter, benefits from high crude oil prices, supporting the Loonie.

The US Producer Price Index (PPI) and Consumer Price Index (CPI) inflation data were expected to provide insights into the potential Fed rate hike at the September meeting, which could help curb the Greenback's decline. Analysts at National Bank of Canada highlighted that the escalating Middle East tensions were reinforcing the support for the Canadian Dollar, as the odds of a return to normalcy in the Strait of Hormuz fell below 30% for the year-end.

In technical analysis, the USD/CAD pair was seen as holding below key moving averages and resistance levels, with a bearish Relative Strength Index (14) still in effect. The potential break below the lower Bollinger band near 1.3750 could expose the pair to further downside pressure, while a recovery above the 20-day Bollinger midpoint at 1.3842 indicated easing pressure.