The Pound / Canadian Dollar Rate is Due a Rebound

The Canadian Dollar is the one stand-out area of brightness for an otherwise under-pressure British Pound it would appear.

An interesting pattern is forming on the GBP/CAD charts which hints that a potential recovery is due for the pair. 

Indeed, where Sterling is suffering against other currencies it has managed to eke out some gains against the Canadian Dollar over recent days.

The pair is presently quoted at 1.7144, above the 1.6891 lows recorded at the end of the previous week.

Looking for clues concerning the outlook, chart studies confirm the formation of a hammer reversal candlestick after falling following a tough of the 1.7530 highs.

The hammer could signal a reversal of this down move and the beginning of a recovery move back up to the key 1.75 area.

The 50-day moving average and resistance from a monthly pivot stand in the way of further gains and so we would ideally wish to see a break clearly above them and 1.7248 to signal more upside for the pair.

Such a break, however, would confirm a continuation higher to a probable end-target at 1.7530.

Alternatively, a break back down below the hammer lows at 1.6883 would confirm a continuation of the down-trend to a target at support at 1.6700.

Latest Pound / Canadian Dollar Exchange Rates

	Live: 1.8599▼ -0.01% 12 Month Best: 1.8915
*Your Bank's Retail Rate	1.7966 - 1.8041
**Independent Specialist	1.8338 - 1.8413 Find out why this is a better rate

* Bank rates according to latest IMTI data.

** RationalFX dealing desk quotation.

 

Canadian Data Calendar: What to Watch for the CAD

There is no clear advantage for either GBP or CAD from a fundamental perspective.

Oil seems to be exerting an ever lesser influence on the value of the Canadian dollar, especially on the GBP/CAD pair.

Chinese Caixin Manufacturing PMI may help support the loonie and commodity currencies in general, when it is released on Friday, as it has been trending higher of late and could therefore serve up another positive surprise.

The most important domestic release for the Canadian Dollar this week is the release of GDP data on Friday September 30, which should reinforce analysts’ expectations of a rise in the economy’s growth rate in Q3.

The CAD has come under notable pressure of late on the back of underwhelming economic data releases and those hoping for a stronger currency will need this result to go their way.

Markets are forecasting a reading of 0.3% but one analyst believes we could well be in for a beat on expectations.

“The June rebound in growth is expected to have carried into July with real GDP expanding by 0.4% m/m. Details should show gains in extraction and manufacturing activity with an extra lift provided by utilities,” commented Toronto-based broker, TD Securities, in a note to clients.

“This will further reinforce a strong Q3 (growth tracking at 3.0%) but there is more uncertainty surrounding the underlying pace of growth heading into the end of the year. A further disappointment would place pressure on the BoC to cut,” they add.

An interest rate cut by the Bank of Canada (BOC) is a real and present danger ever since BoC governor Stephen Poloz said that the Canadian economy still faced headwinds and needed continued support from monetary stimulus, which suggested further interest rate cuts might be coming.  

Other Canadian data of note this week includes the Trade Balance in August on Wednesday.

If the data should showed an increasing deficit, then it could prompt weakness in CAD.

Key Data Events for Pound Sterling

Friday September 30 sees the release of the most significant economic statistic for the pound, this week, in the form of the first revision of second quarter GDP.

The preliminary result already released, surprised to the upside, coming out at 2.2% rather than the 2.0% forecast, but on Friday we shall see if that upbeat result holds.

Although it does not cover much of the period after Brexit, and is therefore not representative of the impact of the referendum, it still reflects the high degree of uncertainty prevalent in the run up to the vote, and so is some sort of barometer for how the economy coped under uncertain conditions.

Second quarter Business Investment is also out on Friday and will also be closely watched by analysts trying to make sense of how well the economy has managed with the uncertainty stemming from the referendum – again in the run up to the vote in this case rather than afterwards.

Common sense dictates that Business Investment would fall in the run up to the referendum as many businesses would have delayed investment decisions on major projects until after the vote, however, Friday’s data will tell for sure.

There is a possibility of a surprise to the upside since data has up until now, more often than not, beaten expectations which were tilted to the downside for the referendum period.

The pound continues to be vulnerable to risks associated with the outcome of Brexit negotiations and fears of a ‘hard’ Brexit resulting.

The currency is therefore sensitive to any commentary suggesting such a hard line will be taken in negotiations or that the UK will end up leaving the common market as well as the EU, as was suggested by recent comments from Chancellor of the Exchequer Philip Hammond.