Two trades to watch: EUR/GBP, USD/CAD

EUR/GBP rises, German confidence unexpectedly improves, UK budget in focus. USD/CAD look to BoC rate decision.

Charts (4)

EUR/GBP rises, German confidence unexpectedly improves, UK budget in focus

EUR/GBP is pushing a few pips higher as investors look ahead to the British government’s autumn budget.

Chancellor Rishi Sunak will lay out his tax & spending plans for the coming year whilst the OBR will provide GDP and borrowing forecasts.

 The Euro is being underpinned by stronger than expected German GFK consumer confidence, which unexpectedly rose to 0.9 defying expectations of a -0.5 decline. The report suggests that households continue to support the economic recovery in Germany.

Where next for EUR/GBP?

EUR/GBP has been trending lower since the start of the year. However, the latest leg lower kicked off at the end of September.

EUR/GBP trades below its falling trendline from late September and below its 20 & 50 sma. The RSI is supportive of further losses whilst it remains out of oversold territory.

Support is seen sat 0.8420 the daily low and last week’s low. A break below here could open the door to 0.84 the weekly low and on to 0.8390 the January 2020 low.

On the flip side a move over the falling trendline at 0.8450 and 0.8470 last week’s high and the 20 sma could negate the near-term downtrend and bring 0.85 into focus.


USD/CAD look to BoC rate decision

The Bank of Canada are widely expected to rein in bond purchase at this month’s meeting.

After a strong jobs report and amid rising inflation at 4.4% the BoC are likely to cut monthly bond purchases in half C$1 billion.

A rate hike from the BoE is currently fully priced in for April next year even though the BoC say the rate hike is coming in H2 2022. Any comments surrounding the first interest rate increase could move the Canadian dollar.

WTI oil is easing lower exerting pressure on the loonies. Meanwhile the USD is edging lower ahead of US durable goods data which is expected to decline-1.1% after 4 months of gains.

Learn more about BoC

Where next for USD/CAD?

USD/CAD trades within a descending channel dating back to mid-September. It trades below its 50 & 20 sma and the 20sma has also crossed below the 50 sma in a bearish signal.

However, a recovery could be underway. The bullish crossover on the MACD is keeping buyer’s hopeful. Any recovery would first need to break above 1.24 the upper band of the falling channel and 1.2410 last week’s high. A move beyond here could exposer the 20 sma at 1.2460 and the September low of 1.2490.

On the downside, support can be seen at 1.2340 the weekly low and channel mid-point ahead of 1.2285 the October low.



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