The Pound to Canadian Dollar exchange rate is still moving within a sideways daily range after bottoming in the 1.55s.
At the start of the new week the pair is quoted at 1.6454.
Concerning the near-term outlook, the exchange rate has now formed a possible double bottom reversal pattern at the lows which could signal a reversal of the downtrend if it results in activation by way of a break higher.
Confirmation of a reversal higher would come from a move above the neckline at 1.7125.
Such a move would be expected to lead to 1.8000 and the 200-day moving average (MA).
The move across the major trendline drawn from the 2015 highs is a bullish sign and increases expectations of a bullish break.
The general look-and-feel of the current price action encourages a bullish view – we find it difficult to envisage the current flag-like consolidation breaking to the downside.
Instead we see a greater chance of a break above the top of the consolidation at 1.6631, leading to a continuation up to the first target at 1.7120.
Momentum, as measured by the MACD indicator in the bottom pane, is showing robust up-trending momentum which supports a bullish outlook.
Concerning the fundamental agenda for the Canadian Dollar in the week ahead, there are no tier-one data releases out this week but there are a few tier-two, such as Foreign Securities Purchases in January, out on Thursday, March 16 at 12.30 GMT and Manufacturing Sales which are expected to drop -0.4% in January when released on Friday at 12.30.
With no major releases on the horizon the Canadian Dollar may continue to gain support on the back of data out on Friday which extremely strong recovery in the labour sector.
“Following Friday’s exceptionally strong Canadian labour-market report, USD/CAD could be near a peak as well. USD/CAD has been one of the strongest currencies this month and is due for a correction. Friday’s labor-market report could be the catalyst as more than 105K full-time jobs were added in February, driving the unemployment rate down to 6.6%. This was the largest increase in full-time work since May 2006. Although part-time employment plunged, the change from part- to full-time work is very healthy for Canada’s economy, particularly as wages are on the rise with average hourly earnings increasing 1.1%,” says BK Asset Management’s Kathy Lien.
Bank of England Decision, Employment Data to Drive Sterling this Week
Direction in Pound Sterling will largely rest with the outcome of the monthly Bank of England (BoE) meeting due to be held on March 16 at 12.00 GMT.
Although no-change in policy is expected, the minutes which are released at the same time as the decision, will show how members deliberated on monetary policy issues.
Whilst some commentators had seen the BoE moving towards a tighter monetary policy stance - i.e. looking to raise interest rates, something that is supportive of Sterling - but this has probably changed since the spring Budget statement.
There is now a heightened possibility that the BoE will have to keep monetary policy expansive and interest rates low due the Chancellor’s fiscally tight budget, in which he gave away only 3bn in stimulus, according to Jonathan Loynes at Capital Economics.
“Fiscal policy is still set to provide a significant drag on GDP growth over the next few years – very similar to that planned in the Autumn Statement. As such, the onus will remain on monetary policy to support the economy,” says Loynes in a note seen by Pound Sterling Live.
Such a policy will keep the pressure on Sterling, particularly versus the Dollar where interest rates are contrastingly set to rise.
On the ‘hard’ data front, the main release for Sterling is labour market data on Wednesday March 15, although the unemployment rate is not expected to change from the current 4.8%.
Average Earnings are forecast to slip to 2.4% from 2.6% previously and the Claimant Count to go down by 5.0k from -42.5k previously.
Any improvement on those figures could give the Pound to Euro exchange rate a mid-week fillip.