Canadian Dollar retreats from over one-month low vs USD; rallying Oil prices limit losses

The USD/CAD pair attracts some dip-buyers following a modest bearish gap opening on Monday and retakes the 1.3700 mark during the Asian session. Spot prices, for now, seem to have snapped a five day losing streak to levels just below mid-1.3600s, or the lowest since March 13, touched on Friday, though any meaningful upside seems elusive amid mixed cues.

Renewed US-Iran tensions over the Strait of Hormuz trigger a fresh wave of the global risk-aversion trade and assist the safe-haven US Dollar (USD) in building on Friday's goodish rebound from a nearly two-month low. This turns out to be a key factor supporting the USD/CAD pair, though rallying Crude Oil prices underpin the commodity-linked Loonie and could act as a headwind.

Iran said that it is closing the Strait of Hormuz again for commercial vessels and that any ship that approaches it will be targeted. This comes amid an escalation of the US naval blockade of Iranian ports, which Iran views as a breach of the ceasefire and cites as a key reason for calling off the second round of peace talks. The developments fuel global supply concerns and boost crude oil prices.

Furthermore, the USD struggles to capitalize on its early strength and retreats slightly from a one-week top amid diminishing odds for a rate hike by the US Federal Reserve (Fed). This might contribute to capping gains for the USD/CAD pair, making it prudent to wait for strong follow-through buying before confirming that spot prices have bottomed out and placing aggressive bullish bets.