USD/CAD extends losses near 1.3570 on higher oil prices

USD/CAD continues the losing streak on the fourth successive session, trading lower around 1.3570 during the early Asian session on Tuesday. The pair is encountering challenges stemming from a significant surge in oil prices, a trend that could be linked to the military conflict unfolding around the Gaza Strip.

While Canada observed Monday as part of the Thanksgiving national holiday, geopolitical tensions persist, contributing to elevated Crude Oil prices due to concerns about stability in the Middle East. This, in turn, is providing support to the Canadian Dollar (CAD), which is closely tied to oil prices.

Western Texas Intermediate (WTI) oil experienced its most significant increase in six months, reaching $86.01 per barrel on Monday. However, it has since pulled back to $84.70 at the time of writing on Tuesday.

The US Dollar (USD) failed to register significant gains despite the robust US Nonfarm payroll data released on Friday. This lack of appreciation can be attributed to a decline in US Treasury yields on Monday, with the 10-year US Treasury bond yield standing at 4.64% as of the current press time.

Moreover, the remarks made by Federal Reserve (Fed) officials overnight prompted investors to downplay the probability of additional rate hikes, resulting in a further drop in US bond yields. Consequently, this development is perceived as eroding the strength of the Greenback and acting as a headwind for the Loonie pair.

Dallas Fed president Lori Logan suggested that there might be less necessity to raise the Fed funds rate, and Fed Vice Chair Philip Jefferson acknowledged the importance of the central bank proceeding cautiously with any additional increases in the policy rate.

The US Dollar Index (DXY) extends its losses on the fifth successive day, trading around 106.00 at the time of writing.

Despite the ongoing tension between Hamas and Israel, the capital markets have turned positive. This shift has diminished the safe-haven appeal of the USD, leading to downward pressure on the USD/CAD pair.

Investors will likely monitor the forthcoming FOMC meeting minutes scheduled for Wednesday. Anticipation surrounds the impact of this release on expectations regarding the Federal Reserve's next policy move, which could potentially influence demand for the Greenback.

Traders will keenly focus on the US Core Producer Price Index (PPI) on Wednesday and the Consumer Price Index (CPI) on Thursday, as these events hold a pivotal role in assessing inflationary trends and economic conditions within the United States.