GBP/USD – Headed to 1.35?

GBP/USD – Headed to 1.35?

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GBP/USD – Headed to 1.35?

Sterling was supposed to hit a one-month high on the back of Brexit news (Prime Minister May was suppose to increase her Brexit bill offer) but absolutely nothing was announced this past week. Instead, Ireland’s border became an unexpectedly significant hurdle to advancing Brexit talks. Although the border problems are serious ones, at the end of the day as long as May is not pushed out of the government she will be motivated to advance the talks and any progress would be viewed as positive for the currency. So while the Office of Budget Responsibility lowered their 2017 to 2020 GDP forecasts, further weakness in the U.S. dollar or sterling supportive Brexit news could take GBP/USD to 1.34 easily. In the week ahead, the U.K.’s manufacturing PMI report is the most important piece of data on the U.K. calendar and given the sharp rise in industrial orders, there’s scope for an upside surprise that could extend GBP/USD’s rally

Technically, GBPUSD spent all of last week trading above 1.3175. This is significant because it means that the 20 and 50-week SMAs along with the 23.6% Fibonacci retracement of 2014 to 2016 decline held as support. As long as this level continues to hold, GBP/USD should break 1.3400 and make its way to the September 2016 swing high of 1.3445. Above there, the next stop will be 1.35.

USDCAD to 1.35?

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USDCAD to 1.35?

USD/CAD soared to a 7 month high this week on the back of softer data and dovish comments from the central bank. According to the latest reports, retail sales continued to decline while consumer prices grew less than expected, validating the Bank of Canada’s strongly worded guidance. After cutting their 2016 growth and inflation forecasts, Bank of Canada Governor Poloz took to the podium, expressed his frustration with exports and said the central bank actively discussed more stimulus and indicated that housing measures won’t stop them from easing further. Fundamentally, the central bank’s bias and data supports a continued rally in USD/CAD

Technically, USDCAD is overbought but there’s no resistance from here to 1.3457, the September 2015 high. Chances are the rally will stall at that level as there is a very clear head and shoulders pattern in the monthly chart. Support is at 1.3160, the 200-day SMA.

USDCAD Headed to 1.35?

USDCAD Headed to 1.35?

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USDCAD Headed to 1.35?

The price of oil closed below $45 a barrel for the first time since March 19th. Normally this would have driven USD/CAD to fresh highs. However with dual employment reports scheduled for release on Friday investors are treading cautiously and limiting new positions in USD/CAD. The 600-pip rally in the currency pair over the last month took USD/CAD into overbought territory and even though there’s no major resistance until 1.35, investors need to see positive U.S. and/or negative Canadian employment numbers to allow the currency pair to move higher. While economists are looking for strong U.S. jobs data, they are also looking for better Canadian data and how USD/CAD trades will depend on which report has the greater surprise. Ultimately given the move in oil, we expect USD/CAD to head higher and view any decline as an opportunity to buy the pair at a lower level.

Technically USD/CAD is still in a strong uptrend. The break above the 2009 high and 1.30 puts the 61.8% Fibonacci retracement at 1.3475 in view. As long as the currency pair holds above the July 29 low of 1.2862, a move to this level appears likely.

USD/CAD Headed for 1.35?

USD/CAD Headed for 1.35?

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USD/CAD Headed for 1.35?

USD/CAD climbed to its strongest level in 10, almost 11 years today on the back of falling oil prices, the prospect of a National Election and a surprise contraction in GDP growth in the month of May. Oil prices dropped as much as 3.5% today, taking WTI crude close to $45 a barrel. This decline will have a dramatic impact on Canada’s economy and could even prompt the central bank to lower interest rates. Over the weekend Prime Minister Stephen Harper also called for an election on October 19th. This election comes against a backdrop of an “uncertain and unstable” economy at a time when the currency is very weak. While we believe that the Conservatives will remain in power, political uncertainty is rarely good for a currency. Over the past 3 months, the Canadian dollar lost over 7% of its value against the greenback making travel and trade between the U.S. and Canada the cheapest since 1994. In the long run, this will be very positive for Canada’s economy but in the short term, the decline in the currency and the more than 20% drop in oil prices means further gains for USD/CAD. Fundamentally, we believe USD/CAD has the drivers for a move towards 1.35.

Technically the rally in USD/CAD could stop just short of that at 1.3475, the 61.8% Fibonacci retracement of the 2002 to 2007 meltdown. The uptrend in USD/CAD remains intact as long as the currency pair holds above 1.38.