GBP/CAD to 1.95?

GBP/CAD to 1.95?

GBP/CAD to 1.95?

Friday was all about the Japanese Yen but next week our focus turns to the British pound with PMIs and the Bank of England’s Quarterly Inflation Report scheduled for release. The Bank of England has every reason to lower their inflation forecasts and signal to the market that interest rates may not increase until the end of the year at the earliest. Given the sharp fall in retail sales and trade activity in the fourth quarter we are still surprised by the uptick in GDP. We prefer to put greater weight on Bank of England Governor Carney’s dovish comments and the likelihood of the BoE minutes and Quarterly Inflation report echoing that tone. GBP traded lower today and we are looking for further losses that should drive GBP/CAD below1.98 support and possibly even to 1.95. Oil prices are also in the process of forming a bottom and we expect USD/CAD to stage a more meaningful break below 1.40 this coming week.

Technically, GBP/CAD is in a downtrend. We fully expect the pair to test its 1.98 support level. If this is broken, the next stop should be 1.9550. If GBP/CAD rises back above 2.02 then the downtrend will be negated and further gains are likely.

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