The USD/CAD pair is trading positively around 1.3730 in Friday’s Asian session, marking the fifth consecutive day of strength. This is largely due to the stronger US Dollar following the better than expected US S&P Global PMI data for May. The US Composite Purchasing Managers Index (PMI) rose to 54.4 in May from 51.3 in April, with both the Manufacturing and Services PMI also showing growth. This has led to an increase in the USD Index (DXY) above the 105.00 level, providing support for the USD/CAD pair. In contrast, the Canadian Dollar (CAD) is facing pressure from the decline in crude oil prices, as Canada is a significant oil exporter to the United States. Additionally, expectations of a potential interest rate cut by the Bank of Canada (BoC) before the US Fed could also weigh on the Loonie against the USD, as markets are pricing in the possibility of a rate cut in June or July.
Traders are closely monitoring the upcoming Canadian Retail Sales and US Durable Goods Orders data for further direction in the USD/CAD pair. The US S&P Global PMI data has boosted confidence in the US economy, with business activity growing at a faster pace in May compared to April. This positive economic data has contributed to the overall strength of the US Dollar and subsequently supported the USD/CAD pair. The Federal Reserve’s Waller is also set to speak later in the day, which could provide additional insights into the monetary policy outlook. With the current economic uncertainty surrounding the ongoing pandemic, any further developments in economic data could have a significant impact on the currency pair.
On the technical front, the USD/CAD pair is holding above the key resistance level of 1.3700, indicating a bullish bias in the short term. However, the pair is facing some resistance near the 1.3750 level, which could limit further upside momentum. Traders will be looking for a sustained break above this level to confirm a bullish continuation towards the next resistance around 1.3800. On the downside, immediate support is seen at 1.3700, followed by the 1.3650 level. A break below these levels could signal a shift in momentum towards the downside, with the next support around the 1.3600 area.
In conclusion, the USD/CAD pair continues to hold onto its positive bias above 1.3700, supported by the stronger US Dollar and the decline in crude oil prices weighing on the Canadian Dollar. Traders are awaiting key economic data releases and central bank announcements for further direction in the currency pair. Any developments in global oil markets and monetary policy outlooks could also impact the USD/CAD pair in the near term. Overall, the pair remains in a bullish trend, with potential for further upside if key resistance levels are breached.
