Trading opportunities on currency pair: the pound is vulnerable because of the uncertainty connected to the parliamentary elections and ambiguous macroeconomic statistics. Due to strong labor market data in Canada, the GBP/CAD dropped to 1.8382. I’m waiting for a fall to 1.8205, a consolidation during the week and then it may break through the trend line. The medium-term target will remain in the 1.7528/40 zone.
The last time I did an idea on this currency pair was on 16th March, 2015. Back then I noticed the rudiments for a head and shoulders pattern. On 16th March the pound was trading against the Canadian dollar around 1.8838. When I wrote that review the rate was 1.8388. Over the course of 20 trading days the pound has lost 450 points against the Canadian.
Along the way to the neck line of 1.7528, sellers met the 1.8671 level (a horizontal level from February 2014’s peaks). The first limit was successfully passed. Now the pair is heading to 1.8205 (the trend line). These two levels were interim goals in the last review.
The pound is now vulnerable because of the uncertainty connected to the 7th May parliamentary elections and the ambiguous macroeconomic statistics which are constantly forcing market participants to reassess their forecasts about the Bank of England lifting interest rates.
As for the Canadian, its situation has improved. On Friday the Canadian had strengthened on the back of strong data for its labor market. The March report for employment values showed that the Canadian economy’s job creation had grown by 28,700. Unemployment stayed at 6.8%. The low price of oil has been a source of pain for the Canadian. However, a growth of reserves of crude oil, Brent is trading around 58 dollars.
On Wednesday the Bank of Canada will convene. Forecasters believe that the central bank will keep the interest rate at 0.75%. Leaving monetary policy untouched will send the GBP/CAD down. If the cost of oil doesn’t fall any further, the pound will be by the trend line by Friday.
I’m waiting for a fall to 1.8205, a consolidation during the week and then it may break through the trend line. The price zone is 1.7258/40.
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Forecasts which are made in the review constitute the personal view of the author. Commentaries made do not constitute trade recommendations or guidance for working on financial markets. Alpari bears no responsibility whatsoever for any possible losses (or other forms of damage), whether direct or indirect, which may occur in case of using material published in the review.
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