“Still decent underlying bullish momentum,” says Scotiabank

– GBP / CAD finding support at 100 day average and key Fib level
– Consolidates above 1.7213 as CAD rally, GBP fall weighs on
– CAD more stable with oil and risk assets as GBP suffocated by UK data

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  • GBP / CAD reference rate at publication:
  • Place: 1.7280
  • Bank transfer rate (indicative guide): 1.6675-1.6796
  • Specialist money transfer rates (indicative): 1.7124-1.7159
  • More information on obtaining specialized rates, here
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The pound rate against the Canadian dollar fell back to a significant technical support level ahead of the weekend and potentially faced a period of consolidation as the loonie continued to stabilize and the pound was held back by data uninspiring British economics.

The Canadian dollar was one of the top performing major currencies heading into the weekend as it continued to stabilize alongside oil prices and stock markets while potentially benefiting from the submissive state of the US dollar.

Meanwhile, the pound was down against all of its major counterparties except for an underperforming safe haven Japanese yen after UK retail sales figures and IHS Markit PMI figures for June and July. left the market with little reason to encourage the British currency.

“The fall in the Composite PMI is not as worrisome as it sounds as the biggest gains from the easing of restrictions have already been made. But comments in the press release citing slowdowns in growth due to self-isolation mean that the resurgence of the virus becomes a growing downside risk to our forecast of GDP returning to its February 2020 level in October, ”a said Kieran Tomkins, assistant economist. To Capital economics.

The net effect of Friday’s price movements saw the rate of the British pound against the Canadian dollar slide 1.73 and return to the 1.7213 area where it previously found support on Wednesday and Thursday, as he volatile trading week is drawing to a close.

GBP CAD four hours

Above: Pound rate against the Canadian dollar shown at 4 hour intervals with Fibonacci retracements of the May rally, moving averages of 55 (blue), 100 (green), and 200 (black).

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“The GBPCAD quickly rallied to the 1.75 (and slightly higher) area after breaking the ceiling resistance noted at 1.7260. But the price action has become volatile,” said Juan Manuel Herrera, strategist at the house of Scotiabank in a Tuesday note.

“There is still decent underlying bullish momentum in GBP, however, as per intraday, daily and weekly oscillators, which may limit losses. Look for 1.7250 / 60 to keep GBPCAD weak for now,” adds Herrera.

Friday’s IHS Markit surveys, weaker than expected for July, warned that UK economic dynamics could slow further in the coming months due in part to the fact that large numbers of workers have been forced to isolate by the government testing and tracing program, a situation which itself results from the rampant spread of newly mutated editions of the coronavirus among one of the most vaccinated populations in the world.

Retail sales data surprised on the upside for June, but was unable to dissuade the idea that the UK’s recovery may now be heading on a slower and possibly more lane. strewn with pitfalls, just as the Canadian dollar seems to be finding its feet after heavy losses. earlier this week.

“Our rolling financial factor model, which uses commodity prices and interest rate differentials as well as USD indices and other risk appetite factors, still suggests that the USDCAD should be in the 1.24 lows based on correlated financial prices. We believe this is the direction in which it is most likely to drift if the USD index stabilizes around current levels, ”said Greg Anderson, Global Head of Forex Strategy at BMO Capital Markets.

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The Canadian dollar had suffered heavy losses alongside oil prices and the stock markets on Monday, leading to declines for the loonie which lifted the USD / CAD to its highest level since February while briefly raising the Canadian dollar au- above 1.75 for the first time since April.

But benchmarks for oil have since stabilized, with investors also renewing an offer to buy stocks and other risky assets, allowing the Canadian dollar to find its footing just as the appetite for the pound sterling has. was held back by soggy UK economic data and recent comments from bank of england, which suggests only a limited or nonexistent appetite on the part of the BoE for a “tightening” of its monetary policy in the near future.

This combination leaves the short-term outlook for the British Pound to Canadian Dollar rate essentially hinged on the path of the USD / CAD, which it often tends to follow and always reflects in part, as GBP / CAD is actually a merger of USD / CAD and GBP / USD.

GBP to CAD Daily

Above: Pound rate against the Canadian dollar shown at daily intervals with Fibonacci retracements of the May rally, moving averages of 55 (blue), 100 (green) and 200 (black) as well as USD / CAD (orange).

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