USD/CAD remains supported above 1.3700 ahead of Canada's CPI release

• Canadian Dollar appreciated on USD weakness, but upside attempts remain limited.
• Oil prices' sell-off triggered by the Middle East ceasefire is weighing on the CAD.
• Investors are also wary of a sharp increase ¡on inflation that will complicate the BoC's monetary policy. in
  

The US Dollar retreated against its Canadian Counterpart on Monday as Trump's announcement of a ceasefire in the Middle East boosted risk appetite. The pair's reversal, however, has been capped above 1.3700 with investors awaiting Canadian inflation figures.

The US Dollar is trading lower across the board, with the US Dollar Index (DXY) more than 1% below Monday's highs. The agreement between Israel and Iran to cease all hostilities has boosted market sentiment and sent safe-haven assets like the US Dollar tumbling.

The slide on Oil prices is weighing on the CAD

The Canadian Dollar, however, is failing to put a significant distance from Monday's lows, weighed by a nearly 15% decline in Oil prices in the last two days. Oil is Canada's main import, and the CAD is strongly correlated to Crude prices.

Investors' hopes of a long-lasting truce in the Middle East have eased concerns about a disruption to Oil supply that had boosted prices in the last few weeks. The risks of Iran blocking the Strait of Horm¡uz have also declined, altogether prompting a more than $10 sell-off in WTI prices over the last two days. This is acting as a headwind for the CAD.

Beyond that, traders are also wary of placing large CAD longs ahead of the Canadian CPI release, due later today. Consumer inflation is expected to have picked up in June, which might complicate the Bank of Canada's monetary policy and increase pressure on the loonie.

In the US, all eyes will be on Fed chairman Powell, whose testimony to Congress will be observed with interest, as the dovish comments by Waller and Bowman in recent days have heightened hopes of a rate cut in the coming months.