USD/CAD holds steady above 1.3700, bulls turn cautious ahead of US consumer inflation

• USD/CAD moves back closer to its highest level since August 16 amid a bullish USD. 
• Bets for a regular 25 bps Fed rate cut in November lift the USD to a multi-week top.
• An uptick in Oil prices underpins the Loonie and caps the pair ahead of the US CPI.

The USD/CAD pair reverses an Asian session dip and is currently placed just above the 1.3700 round figure, within the striking distance of its highest level since August 16 touched the previous day. The intraday uptick, however, lacks bullish conviction amid recovering Crude Oil prices, which tend to underpin the commodity-linked Loonie, and ahead of the latest US consumer inflation figures.

Investors remained wary of a potential escalation in tensions between Israel and Iran, with Israeli Defence Minister Yoav Gallant promising that the strike against the latter would be "lethal, precise and surprising". This raises worries about supply disruptions from the Middle East, which, along with a spike in fuel demand on the back of a major storm in Florida, assists Crude Oil prices to build on the overnight bounce from a one-week low. This, in turn, offers some support to the Canadian Dollar (CAD), though expectations for a larger interest rate cut by the Bank of Canada (BoC) cap gains. Apart from this, the underlying bullish tone surrounding the US Dollar (USD) acts as a tailwind for the USD/CAD pair. 

The USD Index (DXY), which tracks the Greenback against a basket of currencies, touched a fresh eight-week high in the last hour as traders fully price out the possibility of another interest rate cut by the Federal Reserve (Fed) in November. The recent US macro data pointed to a still resilient labor market and forced investors to scale back their expectations for a more aggressive policy easing by the Fed. Adding to this, the September FOMC meeting minutes released on Wednesday showed a consensus that the outsized rate cut would not lock the central bank into any specific pace for future cuts. This keeps the US Treasury bond yields and the USD elevated, assisting the USD/CAD pair to attract some dip-buyers. 

Traders, however, seem reluctant and prefer to wait for more cues about the Fed's rate-cut path before placing fresh USD bullish bets. Hence, the focus will remain glued to the release of the crucial US Consumer Price Index (CPI) later today, which will be followed by the US Producer Price Index (PPI) on Friday. Apart from this, the Canadian monthly employment details on Friday will be looked upon to determine the near-term trajectory for the USD/CAD pair.