UK Pound to Canadian Dollar Rate: Tech Forecast Eyes Potential Breakout Higher
The GBP/CAD pair continues to move sideways under a trendline in the 1.65s as a period of consolidation in the exchange rate extends further.
Despite strength being repelled following several attempts to break above the trendline we still see a slight bias towards more upside, and therefore an eventual break higher emerging.
Looked at in another way, the steep rally up from the January lows followed by the box-like consolidation phase has formed a bull flag pattern, which is likely to breakout higher and rise roughly the same distance as the length of the ‘pole’.
For confirmation of a break higher we would be looking for a move above the 1.6500 highs.
Such a break would be expected to reach as high as 1.6700 just below where resistance kicks in from the R1 monthly pivot.
We will look for a combination of data and political events due over coming days to give the required impetus to break the exchange rate out of its consolidative phase.
Data Ahead for the Canadian Dollar
The big release for the Canadian Dollar is the release of retail sales data for January on Wednesday at 13:30 GMT.
Headline is expected to rise by 0.2% and core (excluding cars) by 0.8% - anything above these expectations are likely to be supportive of CAD.
Analysts at TD Securities expect headline retail sales to rise by a higher 0.4% but core by a more subdued 0.7%.
“Gasoline prices will serve as the primary catalyst behind the strong print and while autos should be a net negative, an anticipated rebound in auto part sales should provide a partial offset to weaker new vehicle sales. Elsewhere, we also expect some giveback in furniture sales while strong holiday sales boosts electronics and general merchandise,” said the lender in a note seen by Pound Sterling Live.
Other data includes Canadian Wholesale Sales at 13.30 on Monday, February 20, which is forecast to show a 0.4% rise in December from 0.2% previously.
At the back end of the week CPI and Core CPI is released at 13.30 on Friday .
Forecasts are for Core to show a -0.1% fall in January from -0.3% previously and for headline to rise 0.3% from -0.2% previously.
Data, Events for the Pound
From a hard data perspective, the week kicks off with the CBI Industrial Trends Survey in February on Monday at 11.00 GMT, which is supposed to produce a 3 from a 5 previously.
There then follows GDP data on Wednesday at 9.30, however, these are revisions from preliminary estimates already published, and are not expected to diverge.
At the same time as the GDP is released we will also see key Business Investment stats for the fourth quarter, which will tell the level with which Brexit concerns are restraining investment, although this has not particularly been the case up until now.
On Friday, February 24 meanwhile we shall see the release of Mortgage stats from the British Banker Association (BBA).
The UK focus seems more likely to shift back to politics over the coming week.
On Monday, Parliament reconvenes after its February recess.
The House of Lords will begin debating the government’s bill to enable the activation of the Article 50 process to leave the EU.
The bill emerged unscathed through the House of Commons, and the Lords seem likely to make only modest tweaks.
“But the amendments do not seem likely to endanger the government’s end-March timetable for activation. Depending on the extent of the proposed changes, activation could even coincide with the EU Council meetings scheduled for 8-10 March,” says Sawicki.
Should the Lords succeed in making amendments to the Bill we would expect this to be positive for the UK currency.
We have seen over recent months that markets tend to like the idea of increased parliamentary scrutiny as it suggests a ‘softer-Brexit’ is a likely outcome.
