GBPCAD has been making higher lows and testing resistance at the 2.0600 major psychological level, creating an ascending triangle pattern on the 1-hour time frame. Price could make a breakout in either direction soon, with the resulting move possibly lasting by around 400 pips or the same height as the chart formation.
Stochastic is showing a bearish divergence, with the oscillator making lower highs and price making higher highs. This suggests that a downside move might be more likely. Meanwhile, RSI is on the move down but is starting to turn higher, indicating a potential pickup in buying momentum.
In addition, the 100 SMA is still above the longer-term 200 SMA, indicating that the uptrend might still carry on.
GBPCAD Fundamental Factors
UK retail sales data came in weaker than expected with a mere 0.1% uptick versus the projected 0.4% gain yesterday. However, the previous report showed a small upgrade from -0.2% to -0.1%.
Earlier in the week, UK CPI figures came in better than expected, hinting that BOE officials might take a more hawkish stance soon. Last week, the BOE events revealed that policymakers aren’t too sure about tightening monetary policy just yet since there are still plenty of headwinds faced by the economy.
As for the Loonie, the event risks today include the retail sales and CPI figures. Headline retail sales is expected to show a 0.2% gain while the core figure could show a 0.6% increase, with the possibility of an upside surprise thanks to better than expected wholesale sales data released yesterday.
Headline CPI is expected to show a 0.1% increase while the core CPI might stay flat. Stronger than expected data could provide a bit of support for the Loonie, especially since energy costs are likely to fall further in the coming months. On the other hand, weak data could show that the drop in oil prices has already set in and might mean a selloff for the Canadian dollar.
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