USDCAD – Why it Could Hit 1.26 Next Week

USDCAD – Why it Could Hit 1.26 Next Week

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USDCAD – Why it Could Hit 1.26 Next Week

One of the biggest stories next week could be a NAFTA deal. In the past week, both President Trump and Prime Minister Trudeau have said that significant progress has been made and its widely believed that a preliminary agreement will be announced at the summit in Peru beginning on Friday April 13th. With the Mexican elections fast approaching, if Trump wants a deal during a time when meaningful policy changes can still be made according to White House trade adviser Peter Navarro, “its got to be soon,” which means “2 weeks to 30 days.” Although Canada’s trade deficit widened more than expected, job growth was very strong in March with more than 32.3K jobs added, 68.3K of which were full time hires. There are no major Canadian economic reports scheduled for release in the week ahead so if a NAFTA deal is announced, it could take USD/CAD to 1.26 quickly.

Technically, there’s a lot of support below current levels for USD/CAD. On Friday, the pair’s decline was halted by the 50-day SMA near 1.2740. Even if the pair breaks below that level, the 100-day SMA and 200-week SMA sit right at 1.2700. A break below 1.2675 would be needed for an accelerated move lower.

GBP/USD to Crack 1.26

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GBP/USD to Crack 1.26

We believe that GBP/USD will crack 1.26 this week for a variety of reasons. First, sterling should benefit from euro safe haven flows. The French elections are front and center and the polls are very tight. Markets in Europe are closed today but we think investors will grow increasingly nervous as the week progresses and they will express their caution by selling euros. Also the U.S. dollar should also extend its slide after liquidity returns to normal on Tues. Last week’s retail sales and consumer price reports along with today’s Empire State manufacturing index were exceedingly weak, eliminating the chance of a June hike. President Trump is also trying to change the Affordable Health Care Act rules which could spell big trouble for the U.S. economy. Tensions remain high with North Korea and Russia, so geopolitical risks could also weigh on the dollar this week. Lastly, with no U.K. economic reports scheduled for release until Friday, sterling is bid and should extend its gains above 1.26

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Technically, GBP/USD is forming an ascending triangle and appears poised to test the 200-day SMA at 1.2625. If that breaks, we should see GBP/USD hit 1.27.

GBP/USD  – Back to 1.26?

GBP/USD – Back to 1.26?

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GBP/USD – Back to 1.26?

Sterling dropped to the bottom of its month long range versus the U.S. dollar before rebounding strongly to end the day right under 1.25. This past week’s U.K. economic reports were mostly better than expected with retail sales rising strongly, wage growth accelerating and core CPI ticking up. However gains in sterling were stymied by a more cautious outlook from the Bank of England. While the central bank repeated their limited tolerance for above target CPI, they felt that inflation may accelerate less than they had forecasted in November because of recent gains in pound. They also forecast a slowdown in growth next year and combined these 2 comments gave sterling traders the green light to sell the currency. With no major U.S. or U.K. data on the calendar this coming week, GBP/USD bounced off the 50-day SMA and should continue trading between 1.24 and 1.2750. There’s some resistance at the 20-day SMA near 1.2550 but we think GBP/USD should find its way back above 1.26.