The USD/CAD pair strengthened slightly, interrupting a three-day decline and showing resilience just below the 100-day SMA. However, quotes do not yet demonstrate confidence in a bullish trend as the market awaits the release of the latest US inflation data.

The release of the critically important US consumer price index (CPI) and Thursday's producer price index (PPI) could provide new guidance for future Federal Reserve policy. These data will have a significant impact on dollar demand in the short term and could provide USD/CAD with fresh momentum. At the same time, the mix of conflicting factors is keeping traders from making aggressive bullish bets.

On Tuesday, oil prices reached a one-and-a-half-week high after Mojtaba Khamenei, an adviser to Iran's supreme leader, said the Strait of Hormuz will not be opened until the US meets Tehran's demands.

In addition, Iran-backed Houthis in Yemen intensified attacks on ships in the Red Sea and the Bab-el-Mandeb Strait, targeting Saudi vessels. These events pushed oil prices higher, thereby strengthening the commodity-dependent Canadian dollar.

Meanwhile, investors remain concerned that high energy prices could again spark inflationary pressure and force the US central bank to adopt a tougher stance. According to CME Group's FedWatch tool, traders currently assign more than a 75% probability of Fed rate hikes by the end of this year. This, together with ongoing geopolitical uncertainty, provides some support for the US dollar as a safe-haven asset and restrains further declines in USD/CAD, which calls for caution from bears.