Canadian Dollar steadies as oil gains offset USD bounce before PPI

The USD/CAD pair struggles to capitalize on the previous day's modest gains and consolidates just above the 1.3800 mark during the Asian session on Thursday. Traders seem hesitant and opt to wait for the release of US inflation figures before placing fresh directional bets.

The US Producer Price Index (PPI) report will be published later this Thursday, while the US Consumer Price Index (CPI) is due on Friday. The crucial data will be looked at for more cues about the Federal Reserve's (Fed) policy path, which, in turn, will play a key role in driving the US Dollar (USD) demand and provide some meaningful impetus to the USD/CAD pair.

In the meantime, traders have been pricing in a greater chance that the US central bank will raise borrowing costs at its policy meeting on September 15-16. Furthermore, inflation risks stemming from persistently higher energy prices underpin prospects for immediate Fed tightening. This, along with escalating US-Iran tensions, benefits the safe-haven Greenback.

In the latest developments surrounding the Middle East crisis, Iran attacked 10 ships near the Strait of Hormuz after the US announced it had sunk five Iranian oil tankers in the Gulf of Oman and near Kharg Island. This fuels concerns about a prolonged disruption to supplies, lifting crude oil prices to a fresh three-month top and acting as a tailwind for the USD.

Meanwhile, US bond yields remain supported as investors seem disappointed by the US Treasury's announcement that it would buy back up to $6 billion in 10-year to 20-year maturities. This contributes to the modest USD uptick, though elevated crude oil prices might continue to underpin the commodity-linked Loonie and cap any further gains for the USD/CAD pair.

The USD/CAD pair maintains a bearish near-term tone beneath the 100-day Simple Moving Average (SMA) at 1.3926. The pairs position below this longer-term average suggests rallies remain corrective for now, with the broader structure hinting at continued downside risk unless buyers can reclaim the 1.3900 mark.

On the downside, a sustained break and acceptance below the 1.3770-1.3765 region will be seen as a fresh trigger for bearish traders. This would set the stage for an extension of the recent well-established downtrend witnessed over the past two months or so.