British Pound / Canadian Dollar Rate Just hit 1.50 as Sterling is Struck by Lightning
GBP to CAD conversion went into a freedive on 7th October thanks to flash crash in the GBP/USD at the open of Asian trade - what comes next?
It's all about Sterling - again - on Friday thanks to the eye-watering and unexplained dive the currency succumbed to in early Asian trade.
GBP/USD has suffered a flash-crash akin to the one that plagued the Dow Jones in 2010, with investors at a loss for the exact reason behind the fall.
GBP/CAD was caught in the crossfire and at one stage touched 1.5079 before recovering to 1.65 at the time of writing.
Understandably, the pair has not recovered all the losses it experienced as the flash crash only further exacerbates the negativiting surrounding Sterling.
"While the Pound has recovered the majority of its losses against the Dollar (at its nadir it struck 1.18), the event has still spooked investors, leaving sterling with a fresh 31 year low hitting 1.4% decline," points out Connor Campbell at Spreadex in London of the headline GBP/USD rate .
The flash crash occurred when liquidity usually is at its thinnest, after US trade has closed and trading in Japan and Australia has just started.
In addition, activity was particallary low due to investors being cautious ahead of the US payroll figure released this afternoon.
"The flash crash has left investors baffled with many speculating that computer algorithms trading triggered the fall," says Benjamin Dousa at SEB.
Expect the GBP/CAD's move lower to extend.
Downside set to Extend
The recent declines seen in GBP/CAD reinforces the call we made hours earlier about the pair.
We expect the pair to retain a heavy tone at least until significant Canadian employment data is released on Friday.
Given the dominant downtrend, we expect GBP/CAD to push below the 1.6734 lows and extend down to the next level of support at 1.6690, followed possibly by 1.6600:
Many strata of support, however, do complicate the picture, so the catalyst lower will need to be strong to overwhelm the dense layers of technical support:
The above daily chart shows that the pair is actually within recent ranges and would have further to fall in order to threaten the previous 2016 lows.
If the worst of Sterling's sell-off is now behind it then we could well see the currency pair move back higher into its recent range.
Most of the important UK data has already been released for this week, but that was overshadowed by Brexit sentiment - and when sentiment is in charge of a currency it becomes incredibly hard to call the next moves.
For the Canadian Dollar though, data could be instructive.
Friday sees the release of Employment data on the day the US releases Non-Farm Payrolls.
The Unemployment rate in Canada is forecast to remain at 7.0%, with a 10k rise in Employment forecast.
Ivey PMI came out at 52.3 in August.
Data may impact on CAD more than previously after Governor Poloz’s speech “Lower for longer” in which he hinted that further monetary stimulus might be forthcoming from the Bank of Canada (BoC) if the economy continued to slow.
Before then the BoC had been expecting the government’s generous fiscal stimulus programme to do most of the heavy lifting of growth instead.
Latest Pound / Canadian Dollar Exchange Rates
  | Live: 1.8608▲ + 0.04%12 Month Best:1.8915 |
*Your Bank's Retail Rate
| 1.7976 - 1.805 |
**Independent Specialist | 1.8348 - 1.8422 Find out why this is a better rate |
* Bank rates according to latest IMTI data.
** RationalFX dealing desk quotation.
