GBP/CAD breaks out ahead of busy week for Loonie
Fawad Razaqzada November 18, 2019 12:53 PM
The GBP/CAD has broken to a new high for the year following a period of consolidation. As well as ongoing weakness for the Canadian dollar, we have seen renewed strength for the British pound, which has rallied as opinion polls over the weekend showed support for Prime Minister Boris Johnson’s Conservative party rising to their highest levels since 2017. Johnson has pledged to overhaul business rates in an effort to step the rapid decline of the High Street. But in a surprise move, he has also scrapped a plan to cut the corporation tax to 17 from 19 percent, in order to prioritise public spending instead. Meanwhile, the Canadian dollar has been falling since the end of last month after the Bank of Canada proved to be more dovish over its outlook for interest rates than expected amid trade and other global uncertainties.
It will be a busy week for the Canadian dollar. Here is what’s on the agenda over the next four days:
- Canadian manufacturing sales will be released on Tuesday. Sales are expected to have fallen 0.5% after a 0.8% rise the month before. A reading worse than this could weigh heavily on the Loonie.
- Canadian CPI will come out on Wednesday. This should be important in so far as shaping investors’ expectations over future interest rates are concerned.
- BOC Governor Poloz will be speaking on Thursday about economic change and the path forward at a fireside chat, in Toronto.
- Canadian retail sales will be released on Friday. This will be another top-tier data that could impact the CAD
Source: Trading View and FOREX.com.
Ahead of the above data releases, the GBP/CAD has, as mentioned, broken out to a new high for the month above old resistance at 1.7090/95 area. This was a sturdy resistance level previously, so the fact that rates have finally broken above it means the path of least resistance continues to be to the upside and will remain that way until and unless something changes dramatically. The above data releases have the potential to change the bullish technical trend. But right now, the buyers seem to be in control, and they would be looking to defend their key support levels, starting at that 1.7090/95 area, which was previously resistance. If the bullish trend continues, as we suspect it might, then rates could head towards 1.7315 area next, which was the low prior to the breakdown back in May.
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 Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.