GBP/CAD: Canadian CPI and retail sales in focus

Boosted by the oil price rally, the Canadian dollar remains fairly supported despite the Bank of Canada this week reiterating that that it will be cautious with respect to future hikes amid concerns over trade issues.

Boosted by the oil price rally, the Canadian dollar remains fairly supported despite the Bank of Canada this week reiterating that that it will be cautious with respect to future hikes amid concerns over trade issues. Still, the central bank tried to sound optimistic about the economic outlook and if today’s inflation and retail sales figures show positive surprises then this could support the CAD further. But if they disappoint badly then we could see a sharp sell-off as investors’ expectations over the next BOC rate hike is pushed further out.

Headline Consumer Price Index (CPI) measure of inflation in Canada is expected to have risen 0.4% month-over-month in March after climbing by 0.6% the month before. In addition to the headline CPI, Statistics Canada will publish other measures of CPI including core, trimmed, median and common. It is worth taking into account these measures as well in order to get a full picture of inflation. Meanwhile both headline and core retail sales in February are also expected to print 0.4% month-over-month each.

While the obvious choice for many traders may be the USD/CAD when it comes to trading the Canadian data, the CAD crosses might actually offer better opportunities. Indeed, with the US dollar trending higher over the past few days, it may be worth playing the CAD’s potential strength against a weaker currency such as the NZD or GBP. In contrast, if the data disappoints then the USD/CAD may well be the one that actually takes off. So, we suggest that the CAD bears should be watching the USD/CAD for a potential rally, and the CAD bulls should monitor the GBP/CAD for a potential sell-off, post the data release.

In fact, the GBP/CAD is looking somewhat bearish after this week’s release of disappointing data in UK data and dovish remarks from the Bank of England’s Governor Mark Carney. Thus, if today’s Canadian data beats expectations then the GBP/CAD could fall further. From a purely technical perspective, the breakdown below horizontal support at 1.7850 is bearish. This level is now the first line of defence for the sellers. If this breaks then the cross could rise back towards the top of its bear channel around 1.7950.But if it continues to push higher and breaks Thursday’s high at 1.7970 and holds above it then this would end the short term bearish bias.

Meanwhile if the selling pressure on the GBP/CAD continues, then the next key target for the bears is around 1.7600, which is where the long-term bullish trend line comes into play. Below here is the 38.2% Fibonacci retracement at 1.7430.

Source: eSignal and

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account