The USD/CAD pair continued its upward trend in Asian trading on Friday, rising for the third consecutive session and trading around 1.3840. The Canadian dollar has been relatively weak recently, partly due to the decline in oil prices and partly due to the relative strength of the US dollar ahead of the release of US inflation data, which has provided upward momentum for the USD/CAD pair. As a typical commodity currency, the Canadian dollar's exchange rate performance is strongly correlated with oil prices. When international oil prices weaken, Canada's energy export revenue and terms of trade face pressure, and the Canadian dollar is usually easily suppressed. Therefore, the recent decline in oil prices has been one of the important drivers of the USD/CAD's continued rebound. However, there is currently no clear logic for a sustained decline in the crude oil market. The ongoing tensions in the Middle East and the high level of uncertainty surrounding energy transportation and supply chains remain significant. If the conflict escalates further, or if energy facilities and transportation routes are further impacted, crude oil prices may regain a supply risk premium. Once oil prices strengthen again and Canada's terms of trade improve, the currently suppressed Canadian dollar may have room to recover. From a valuation perspective, the strategy team at RBC Capital Markets believes that the Canadian dollar's current performance may not fully reflect the supporting factors in the commodity market. Further strengthening of crude oil and other commodity prices would improve Canada's terms of trade and could provide additional support for the Canadian dollar. Meanwhile, the driving factors for the US dollar are changing. The US Producer Price Index (PPI) rose 5.4% year-on-year in August, significantly faster than the revised 4.8% in July and higher than the market expectation of 5.3%. On a month-on-month basis, the US PPI rose 0.4% in August, in line with market expectations; core PPI rose 0.2% month-on-month, slightly lower than previous market expectations. The significantly faster year-on-year PPI growth has reinforced the market's assessment that inflationary pressures in the US remain. This has led investors to reassess the Federal Reserve's future interest rate policy and has also provided some support for the US dollar. For USD/CAD, if US interest rate expectations continue to rise while oil prices remain weak, the USD/CAD exchange rate may maintain a relatively strong structure. However, PPI is not the only indicator determining the Fed's policy. The market is currently more focused on the upcoming US CPI data. Since the CPI can further verify whether US consumer inflation has accelerated again, investors have significantly reduced directional positions before the data release, resulting in USD/CAD consolidating and testing the waters before the data release. If the US CPI is higher than market expectations, the market may further increase its expectations for the Fed to maintain a tight policy, and a stronger dollar will push USD/CAD higher. Simultaneously, if international oil prices do not rise in tandem, the Canadian dollar will lack commodity-side support, and USD/CAD may further test key resistance levels. Conversely, if the CPI is lower than expected, signs of cooling US inflation will be reconfirmed, and US Treasury yields and the dollar may be suppressed. In this scenario, if oil prices rebound due to supply risks, the Canadian dollar will receive dual support from a weaker dollar and rising commodity prices, and USD/CAD may experience a significant pullback. Currently, the market is trading on two main themes simultaneously: the first is US inflation and Fed interest rate expectations, and the second is oil prices and Canadian terms of trade. This means that the short-term direction of USD/CAD is not entirely dependent on the US dollar itself; whether oil prices can stop falling and rebound is also a crucial variable determining the strength of the Canadian dollar. From a fund flow perspective, the market did not significantly establish one-sided positions before the release of key US inflation data. The US dollar has generally shown a moderately strong performance against major G10 currencies, but has not yet formed a comprehensive breakout. The market is more inclined to wait for new inflation signals to confirm the direction of interest rates, which also means that the current three-day rise in USD/CAD still needs further data verification. If US CPI continues to show resilient inflation while oil prices remain low, the upward trend of USD/CAD may be strengthened; if US inflation cools down and is coupled with a rebound in crude oil, the current USD/CAD rally may experience a rapid correction. For investors, in the short term, it is crucial to observe the correlation between US CPI, the US dollar index, US Treasury yields, and WTI crude oil prices. From a daily chart perspective, USD/CAD has risen for three consecutive trading days and is currently approaching 1.3840 again, indicating a recovery in short-term bullish momentum. If the exchange rate can effectively break through the resistance near 1.3840, it may further test the psychological level of 1.3900; if it continues to break upwards, then the area around 1.3950 will become an important observation zone for the next stage. On the downside, the first support level to watch is around 1.3780. If it falls below this level, the short-term rebound structure may be weakened, and further attention should be paid to the 1.3720 and 1.3650 areas. Overall, the daily chart structure is currently biased towards a rebound, but whether it can develop into a more sustainable upward trend still depends on the fundamentals of the US dollar and the trend of oil prices. From the 4-hour chart, USD/CAD maintains an upward trend with prices gradually rising, and short-term buying still has a certain advantage. 1.3840 is a key level that the bulls need to break through. If the 4-hour chart effectively holds above this area, the exchange rate is expected to advance towards 1.3900; if it fails to break through after a rise and falls back below 1.3780, then we need to be wary of a retracement of previous gains, and further testing of the support near 1.3720. In terms of technical indicators, short-term momentum has improved with the continuous rise, but if the price becomes oversold in the resistance zone, the risk of a rapid increase in volatility after the release of the US CPI should still be guarded against. The USD/CAD pair is currently caught in a dual struggle between expectations of US interest rate cuts and the commodity attributes of Canada. Rising US PPI has provided some support for the US dollar, while weakening oil prices continue to pressure the Canadian dollar, causing the exchange rate to rise for the third consecutive day. However, Middle East supply risks could drive a rebound in crude oil prices, and if oil prices strengthen again, the fundamental support for the Canadian dollar may also increase. In the short term, US CPI will determine the next move in expectations of US interest rates, while the WTI price movement is an important reference for judging whether the Canadian dollar can rebound. 1.3840 is the current key resistance level, while 1.3780 is a significant short-term support level.