Canadian Dollar consolidates near four-week top vs USD; elevated oil prices favor bulls

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The USD/CAD pair is seen oscillating in a range during the Asian session on Thursday and consolidating its recent losses to a four-week low, touched the previous day.

USD/CAD struggles to register any recovery from a four-week low, touched on Wednesday.
Bullish oil prices underpin the Loonie and act as a headwind for the pair amid a weaker USD.
US-Iran tensions and energy-driven inflation fears limit USD losses and support spot prices.

The USD/CAD pair is seen oscillating in a range during the Asian session on Thursday and consolidating its recent losses to a four-week low, touched the previous day. Spot prices currently trade just below mid-1.4000s, nearly unchanged for the day, though the fundamental backdrop favors bearish traders.

The US Dollar (USD) languishes near its lowest level since June 18 amid fading US Federal Reserve (Fed) rate hike expectations. Meanwhile, crude oil prices stand firm near a one-month high amid escalating US-Iran tensions and the closure of the Strait of Hormuz. This, to a large extent, offsets the Bank of Canada's (BoC) cautious outlook and continues to underpin the commodity-linked Loonie, which validates the negative outlook for the USD/CAD pair.

Data released on Wednesday showed that the US Producer Price Index (PPI) fell 0.3% last month, compared to a revised 0.6% rise in the previous month. This comes on top of a soft US Consumer Price Index (CPI) report on Tuesday and forced traders to further pare Fed rate hike bets, which keeps USD bulls on the defensive. However, worries about energy-driven inflation remain in play amid the US-Iran standoff and supply disruptions in the Middle East.

The conflict between the US and Iran has intensified sharply since the beginning of this week, with both sides carrying out fresh rounds of attacks. US forces have launched new airstrikes targeting Iranian missile and drone infrastructure, while Tehran has responded with retaliatory drone and missile attacks on US-linked military facilities across the region. Moreover, a US aircraft fired on an unladen oil tanker as it tried to break the naval blockade of Iran’s ports.

This points to a deepening military confrontation. US President Donald Trump further escalated tensions and warned that critical Iranian infrastructure, such as power plants and bridges, could be targeted if the situation continues to deteriorate. This remains supportive of elevated crude oil prices and keeps potential interest rate hikes firmly on the table, which, in turn, holds back traders from placing fresh bearish bets on the USD/CAD pair and limits losses.

Canadian Dollar Price This week

The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies this week. Canadian Dollar was the strongest against the Japanese Yen.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.61%	-1.07%	0.18%	-0.80%	-0.72%	-1.39%	-0.34%
EUR	0.61%		-0.49%	0.82%	-0.21%	-0.16%	-0.80%	0.28%
GBP	1.07%	0.49%		1.25%	0.25%	0.32%	-0.32%	0.80%
JPY	-0.18%	-0.82%	-1.25%		-1.09%	-0.91%	-1.62%	-0.58%
CAD	0.80%	0.21%	-0.25%	1.09%		0.19%	-0.54%	0.53%
AUD	0.72%	0.16%	-0.32%	0.91%	-0.19%		-0.64%	0.34%
NZD	1.39%	0.80%	0.32%	1.62%	0.54%	0.64%		1.12%
CHF	0.34%	-0.28%	-0.80%	0.58%	-0.53%	-0.34%	-1.12%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Canadian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CAD (base)/USD (quote).