GBP/CAD breaks out ahead of busy week for Loonie

As well as ongoing weakness for the Canadian dollar, we have seen renewed strength for the British pound...

The GBP/CAD has broken to a new high for the year following a period of consolidation. As well as ongoing weakness for the Canadian dollar, we have seen renewed strength for the British pound, which has rallied as opinion polls over the weekend showed support for Prime Minister Boris Johnson’s Conservative party rising to their highest levels since 2017. Johnson has pledged to overhaul business rates in an effort to step the rapid decline of the High Street. But in a surprise move, he has also scrapped a plan to cut the corporation tax to 17 from 19 percent, in order to prioritise public spending instead.  Meanwhile, the Canadian dollar has been falling since the end of last month after the Bank of Canada proved to be more dovish over its outlook for interest rates than expected amid trade and other global uncertainties.

It will be a busy week for the Canadian dollar. Here is what’s on the agenda over the next four days:

  • Canadian manufacturing sales will be released on Tuesday. Sales are expected to have fallen 0.5% after a 0.8% rise the month before. A reading worse than this could weigh heavily on the Loonie.
  • Canadian CPI will come out on Wednesday. This should be important in so far as shaping investors’ expectations over future interest rates are concerned.
  • BOC Governor Poloz will be speaking on Thursday about economic change and the path forward at a fireside chat, in Toronto.
  • Canadian retail sales will be released on Friday. This will be another top-tier data that could impact the CAD

Source: Trading View and City Index.

Ahead of the above data releases, the GBP/CAD has, as mentioned, broken out to a new high for the month above old resistance at 1.7090/95 area. This was a sturdy resistance level previously, so the fact that rates have finally broken above it means the path of least resistance continues to be to the upside and will remain that way until and unless something changes dramatically. The above data releases have the potential to change the bullish technical trend. But right now, the buyers seem to be in control, and they would be looking to defend their key support levels, starting at that 1.7090/95 area, which was previously resistance. If the bullish trend continues, as we suspect it might, then rates could head towards 1.7315 area next, which was the low prior to the breakdown back in May.


Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.