GBP/CAD Base at 1.98?

GBP/CAD Base at 1.98?

GBP/CAD Base at 1.98?

On a fundamental and technical basis we like GBP/CAD. Fundamentally, we have strong reasons to believe that the Canadian dollar should be trading lower. Between the sharp decline in oil prices on Monday that was triggered by a report from OPEC that said oil output increased last month to the slowdown in manufacturing activity, expansion in the trade deficit and the rise in the unemployment rate, Canada’s economy is hobbling along. It does not deserve to be trading as firmly as it has and is due for a much stronger reversal. The outlook for sterling is a bit trickier. Data has been soft but policymakers are optimistic. Last week BoE Governor Carney continued to say that wage pressures are building and this morning MPC member Weale said Europe could avoid a secular stagnation and pointed to the pickup in U.K. productivity as a contributing factor to regional growth. Sterling will be in play this week with a number of important economic reports scheduled for release. At this week’s BoE meeting, low price pressures were cited as one of the central bank’s main areas for concern but the labor market is one of the country’s main areas of strength. This week’s economic reports will shed more light on how these 2 key areas of the U.K. economy are performing.

Technically, GBP/CAD found some nice support at 1.98. While today’s gains stopped right at the 100-day SMA, a strong close above 2.00 is needed to end the downtrend and open the door for a move to 2.02. On the downside, if GBP/CAD closes below 1.98, there is no support until 1.9575.

Chart Of The Day

Leave a Comment

Your email address will not be published. Required fields are marked *