USD/CAD trades below 1.3500, faces pressure due to upbeat Crude oil prices

• USD/CAD remains below the 1.3500 psychological level due surge in Crude oil prices.
• Fed’s hawkish stance is reinforcing the bullish momentum of the US Dollar.
• Higher US Treasury yields are providing support for the solid Greenback.
• The prices of liquid gold exceeded one-year highs due to global supply reduction and cautious optimism toward the Chinese economic situation.

USD/CAD extends losses on the second successive day, trading lower around 1.3490 during the early European trading hours on Thursday. The pair is facing challenges due to the surge in Crude Oil prices.

Crude oil prices surged to levels exceeding one-year highs due to ongoing indications of a tightening global supply and cautious optimism regarding an economic recovery in China, which is the world's largest oil importer. WTI price continues the winning streak for the third consecutive day, trading above $93.20 per barrel by the press time.

EIA Crude Oil Stocks Change data on the week ending September 22 showed that stocks decreased by 2.170 million barrels compared with the 2.135 million drawdowns seen a week earlier. Markets expected Oil stockpiles to decline by a much lesser 0.32 million barrels.

The decline in US crude inventories raises concerns about economic downfall stemming from rapidly rising borrowing costs, which supports WTI prices. This, in turn, could undermine the USD/CAD pair as Canada is one of the largest oil exporters to the United States (US).

The US Dollar Index (DXY) extends its gains at its highest levels since December, bolstered by risk aversion, higher US Treasury yields, and economic data. The spot price is hovering around 106.70 by the press time.

The DXY is reinforced by solid macroeconomic data from the US. The US Dollar’s (USD) strength is attributed to the positive performance of US Treasury yields over an impending US government shutdown.

The yield on the 10-year US Treasury note has reached record highs, with standing at 4.61% at the time of writing.

Federal Reserve (Fed) board members. Neel Kashkari, President of the Minneapolis Federal Reserve, recently indicated the potential for further interest rate hikes in the future. The hawkish tone from a Fed member might have supported the bullish momentum of the USD.

Additionally, Kashkari suggested that the option of keeping interest rates unchanged at their current levels remains open, especially if any potential rate cuts are postponed even further. These remarks from Fed officials are contributing to the upward trajectory of the Greenback.

In August, US Durable Goods Orders rebounded with a 0.2% increase, a notable turnaround from the previous month's 5.6% decline. This performance exceeded market expectations, which had anticipated a 0.5% decline.

Market participants will likely watch Canada’s Gross Domestic Product (GDP) on Friday. Along with, the US Core Personal Consumption Expenditure (PCE) Price Index, the Fed's preferred measure of consumer inflation will be eyed., which is expected to reduce from 4.2% to 3.9%.