Technical studies suggest the Pound to Canadian Dollar exchange rate could extend its October-November recovery.
GBP/CAD has been pointed higher pretty much since October 16th.
Sterling traded to a multi-week best against the Canadian Dollar to close the week ending November 4th at 1.6777.
This is one pair that has completely overcome the damage of the October 7th flash-crash which is in itself indicative of GBP/CAD’s outperformance.
With momentum pitted against the Canadian Dollar we would suggest the CAD is likely to lose ground against Sterling over coming days.
“GBPCAD looks poised to close out the week above major resistance points which we had expected to contain the rebound. We have under-estimated the GBP’s powers of recovery in the past few weeks (we had expected corrective gains to get no higher than 1.62/1.63) and now, we have to concede that the GBP rally may extend,” says Shaun Osborne at Scotiabank.
With the market sitting comfortably above 1.66 (where short-term retracement resistance converged with a number of other, longer-term resistance points), Osborne says he will allow for the GBP to rebound towards 1.71 (38.2% of the Jun/Oct sell-off).
The only obvious caveat to this is the outcome of the US election.
CAD has had a torrid time as Mr Trump’s ascendency in the polls combined with lacklustre domestic data and growing expectations for another interest rate cut at the Bank of Canada.
The Canadian currency was the worst-performer in G10 last week, just pipping the US Dollar.
The Mexican Peso also had a shocker as North America is out of favour it would seem.
“The week has all been about the shrinking opinion poll gap between Hillary Clinton and Donald Trump. A 7point lead for Mrs Clinton two weeks ago has been whittled down to 1.3% on the last reading and anxiety haunts the currency market. The dollar’s the main loser in G10, beating only the Canadian dollar which is an obvious ‘loser’ from Mr. Trump winning,” says Kit Juckes at Societe Generale in London.
GBP/CAD gapped lower at the start of the new week as the Canadian Dollar corrected higher in a Clinton recovery bounce.
Markets have rapidly repriced a Clinton victory since the weekend's news the FBI would not be extending its investigations into the email saga.
With hours to go before Americans vote, Democrat Hillary Clinton has about a 90% chance of defeating Republican Donald Trump in the race for the White House, according to the final Reuters/Ipsos States of the Nation project.
Her chances are roughly similar to last week's odds, and any upset by Trump on Tuesday depends on an unlikely combination of turnouts of white, black and Hispanic voters in six or seven states, according to the survey released on Monday.
The pro-Clinton move has aided global stock markets, the Dollar, Canadian Dollar and Mexican Peso higher.