The fall of USDCAD intensified on Friday as Canadian employment numbers were better than analysts had predicted. Employment change, came in at 378.2K, while 150K was expected and the unemployment rate was confirmed at 9% instead of 9.8% expected. This brought the USDCAD pair below 61.8% Fibonacci retracement catapulted CADJPY to a resistance. CADJPY has had a handsome move since we highlighted the pair breaking out from a base at the beginning of October. By reading further you agree with our disclaimer at the bottom of this page and acknowledge that we do not provide investment advice.
The BOE has said that the bank is not introducing negative rates any time soon but there have been reports that the bank might still consider using them in the future. This is understandable from the viewpoint of the UK leaving the European Union and the bank might need negative rates in their arsenal. This is a risk to Cable bulls but at the same time, we have the pair breaking out from a base. This base could be also interpreted as an inverted head and shoulders formation. Let’s take a closer look at the price action and key technical levels in Cable.
We noted on Friday that GBPUSD continues to trade inside the bullish price channel and said that this is a positive indication which suggests continued pressure to move the pair through the resistance above. This has now happened but Cable is trading at the high of the bull channel it’s been in since the beginning of the month. The pair has created a reactionary low at 1.3017, just above the previous resistance zone 1.2985 – 1.3007 (now support) with the next support being at 1.2969. We anticipate that the pair has the potential to eventually move to the proximity of 1.3174 resistance (61.8% Fibonacci retracement). We, therefore, look for buy signals above 1.2934 where the 50-period SMA currently is. Our initial target zones for these potential long trades are 1.3071 – 1.3087 (T1) and 1.3120 – 1.3174 (T2). The first target zone is fairly close to the current market price but if GBPUSD first retraces lower then there would be a higher potential reward. For more analysis on this and other markets, go to tiomarkets.com/analysis and don’t forget to subscribe to TIOmarkets YouTube channel.
Risks include something going awry in Brexit negotiations and the BOE being highly accommodative in the light of the likely forthcoming problems caused by the EU-divorce to the UK economy. Keep an eye out for comments from the BOE, the UK Prime Minister and the EU negotiators. BOE Bailey is due to speak later on today. To take advantage of our analysis and ultra-low trading fees, register for an account and deposit here.
Recent macroeconomic data releases
- Canada Manufacturing PMI, 56
- US ISM Manufacturing PMI, 55.4, 56 expected
- US Average Hourly Earnings, 0.1%, 0.5% expected
- US Non-Farm Employment Change, 661K, 900K expected
- US Unemployment rate, 7.9%, 8.2% expected
- Australia NAB Business Confidence, -4, -8 previous
- EU Retail Sales,4.4%, 2.4% expected
- US ISM Non-Manufacturing PMI, 57.8, 56.3 expected
- Australian Cash Rate, 0.25%, 0.25% expected
- Canadian Trade Balance, -2.4B, -2.1B expected
- FOMC Meeting Minutes
- US Unemployment Claims, 840K, 820K expected
- Canada Employment Change, 378.2K, 150K expected
- Canada Unemployment Rate, 9%, 9.8% expected.
Macroeconomic data releases today
- BOE Bailey Speaks
- ECB Lagarde Speaks
You may access the times and dates in the economic calendar here.
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Chief Market Analyst
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