Two trades to watch: EUR/GBP, USD/CAD
Fiona Cincotta December 12, 2022 8:27 AM
EUR/GBP holds steady even after UK GDP rises for the first time in 4 months. USD/CAD awaits a speech from BoC's Tiff Macklem.
EUR/GBP holds steady despite UK GDP data beating forecasts
EUR/GBP is holding steady after rising last week and as investors digest the latest UK GDP data.
UK economy grew 0.5% MoM in October, rebounding from a -0.6% contraction in September as the royal funeral hit economic growth. The monthly GDP was ahead of forecasts of 0.4% growth and was the first rise in GDP in 4 months. recovery it's mainly a reflection of working days returning to normal rather than a surge in output
The economy shrank by 0.3% in the three months to October.
The GDP figures come ahead of a busy week for UK economic data with inflation and retail figures also due in addition to the Bank of England interest rate decision.
Where next for EUR/GBP?
EURGBP has fallen below its multi-month rising trendline and currently trades in a holding pattern, capped on the lower side by the October low of 0.8580 and on the upper side by 0.8620 last week’s high.
The RSI has just slipped below 50, favoring the sellers.
A break-out trade could look to break below 0.8580 and 0.8550, the 50 sma, to bring 0.85, the round number into play.
On the flip side, buyers could look for a rise above last week’s high to expose the 50 sma at 0.8670 ahead of 0.8820 the November high.
USD/CAD awaits a speech from Tiff Macklem
USD/CAD Fell 1.3% last week, as the loonie tracked oil prices lower and the dollar cheered stronger than expected U.S. economic data.
Oil prices fell almost 11% as demand worries, and a stronger dollar pulled the price lower even after the G7 price cap unrationed oil started.
As the new week begins, USD/CAD is edging higher, oil offers little support to the loonie and as safe haven flows, lifts the greenback.
Attention is turning to a speech by BoC governor Tiff Macklem Later today. However, with the BoC moving away from aggressive rate hikes, his comments may hinder CAD more than help the currency higher.
Where next for USD/CAD?
USD/CAD is extending its recovery from the November low of 1.3350, recapturing the 50 sma, and this testing the rising trend line resistance dating back to early March. the RSI supports further upside whilst it remains out of overbought territory.
Buyers will look for a rise above 1.37, last week’s high, to extend the bullish rally towards 1.3820.
On the flip side, sellers could look for a move below 1.3570, the 50 sma to bring 1.35 into play, the September low, and 1.3390 the December low.
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