Analys från DailyFX
A GBP/CAD Set-up All Traders Can Agree on
Talking Points:
- Outstanding UK Economic Data
- Divergent BoE/BoC Monetary Policies
- Bullish Technical Case for GBP/CAD
GBPCAD can be a challenging pair to trade, but its current set-up is extremely attractive to longer-term macro traders. The Bank of England (BoE) is toeing the line between neutral and hawkish monetary policy, and the vast majority of recent UK data has been outstanding, with the clear bright spot being the latest UK labor market numbers.
UK jobless claims recently posted their strongest reading in a dozen years, and have now declined for 12 consecutive months and beaten expectations for six straight months. UK unemployment data is especially significant due to the impact on the UK’s quantitative easing (QE) program.
See also: A UK Labor Report 12 Years in the Making
The Bank of Canada (BoC), on the other hand, remains firmly in the neutral policy camp, and the most recent employment report from Canada suggests the Bank will remain there for some time.
While the Canadian unemployment rate surprisingly fell below 7.0%, it did so despite a weaker participation rate as more and more unemployed leave the labor force. This is usually a sign of frustration with the labor market and is not good news for Canada. Add to that weaker PMI figures and worse-than-expected building permits for this month and we get a picture of a stagnant Canadian economy.
Such a disparity between the nations’ economies and central bank policies means that we will be seeing interest rate expectations favor the British pound (GBP) over the Canadian dollar (CAD) going forward.
Bullish Technical Case for GBP/CAD
From a technical context, GBPCAD has been consolidating sideways since August 2010 after a significant decline. That consolidation came to an end earlier this fall, when the pair broke higher on GBP strength and CAD neutrality, and that trend looks likely to continue in the medium to long term.
Guest Commentary: GBP/CAD Upward Momentum to Continue
The major support level for GBPCAD is now 1.6250, while the move looks to target at least 1.92 over the coming months. This is an attractive set-up for long-term traders looking to limit their exposure to the US dollar (USD).
By Liam McMahon, currency strategist, GlobalFxClub.com
What’s inside:
- EURUSD broke the ‘neckline’ of a bearish ‘head-and-shoulders’ pattern, April trend-line
- Resistance in vicinity of 11825/80 likely to keep a lid on further strength
- Targeting the low to mid-11600s with more selling
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Coming into last week we pointed out the likelihood of finally seeing a resolution of the range EURUSD had been stuck in for the past few weeks, and one of the outcomes we made note of as a possibility was for the triggering of a ’head-and-shoulders’ pattern. Indeed, we saw a break of the ’neckline’ along with a drop below the April trend-line. This led to decent selling before a minor bounce took shape during the latter part of last week.
Looking ahead to next week the euro is set up for further losses as the path of least resistance has turned lower. Looking to a capper on any further strength there is resistance in the 11825-11880 area (old support becomes new resistance). As long as the euro stays below this area a downward bias will remain firmly intact.
Looking lower towards support eyes will be on the August low at 11662 and the 2016 high of 11616, of which the latter just happens to align almost precisely with the measured move target of the ‘head-and-shoulders’ pattern (determined by subtracting the height of the pattern from the neckline).
Bottom line: Shorts look set to have the upperhand as a fresh month gets underway as long as the euro remains capped by resistance. On weakness, we’ll be watching how the euro responds to a drop into support levels.
For a longer-term outlook on EURUSD, check out the just released Q4 Forecast.
EURUSD: Daily
—Written by Paul Robinson, Market Analyst
You can receive Paul’s analysis directly via email bysigning up here.
You can follow Paul on Twitter at@PaulRobinonFX.
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
EURUSD: Retail trader data shows 37.3% of traders are net-long with the ratio of traders short to long at 1.68 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.07831; price has moved 9.6% higher since then. The number of traders net-long is 15.4% lower than yesterday and 16.4% higher from last week, while the number of traders net-short is 0.4% higher than yesterday and 10.5% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
GBPUSD: Retail trader data shows 38.2% of traders are net-long with the ratio of traders short to long at 1.62 to 1. In fact, traders have remained net-short since Sep 05 when GBPUSD traded near 1.29615; price has moved 3.4% higher since then. The number of traders net-long is 0.1% higher than yesterday and 13.4% higher from last week, while the number of traders net-short is 10.6% lower than yesterday and 18.3% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse lower despite the fact traders remain net-short.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
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