Why Is USD/CAD Gaining Strength? | Key Factors Driving the Loonie's Decline

The xmr moneroUSD/CAD currency pair maintains its bullish momentum for the fifth consecutive trading session, hovering around the 1.3730 level during Friday's Asian market hours. This sustained upward movement reflects several fundamental factors influencing both currencies in the pairing.Recent economic indicators from the United States have provided substantial support for the greenback. The latest S&P Global PMI readings surprised to the upside, with the composite index jumping to 54.4 in May from April's 51.3 reading. Manufacturing activity edged into expansion territory at 50.9, while services sector growth accelerated to 54.8. These robust figures have propelled the US Dollar Index (DXY) above the psychologically significant 105.00 level, creating favorable conditions for USD-denominated pairs.Meanwhile, the Canadian dollar faces multiple headwinds. As the largest crude oil exporter to the United States, Canada's currency remains particularly sensitive to energy market fluctuations. The recent pullback in oil prices has removed a traditional support pillar for the loonie. Additionally, diverging monetary policy expectations between the Federal Reserve and Bank of Canada are weighing on the CAD.Market pricing currently suggests a 53% probability of a 25 basis point rate cut by the BoC in June, with a July reduction fully priced in. This anticipated policy easing contrasts with the Fed's more cautious approach, creating a favorable interest rate differential for USD/CAD bulls.Technical indicators show the pair trading above all key moving averages (20, 50, 100, and 200-day SMAs), suggesting the current uptrend remains intact. Immediate resistance levels to watch include the daily pivot point R1 at 1.3763, while support appears at the 1.3676 level (daily pivot S1).Traders await the release of Canadian retail sales data later today, which could provide fresh catalysts for the currency pair. The figures will offer insights into consumer spending patterns and overall economic health. Additionally, scheduled remarks from Fed official Waller may influence USD sentiment in afternoon trading.The combination of strong US economic data, weaker commodity prices, and diverging central bank policies continues to create a favorable environment for USD/CAD appreciation. Market participants should monitor these key factors closely as they assess the pair's near-term trajectory