This pound pair is deciding whether to make a bounce or a break from support, and the upcoming U.K. CPI release could determine where it goes!
Before we discuss today’s setup, check out the headlines that moved the major currencies today:
Fresh Market Headlines & Economic Data:
- Powell: U.S. economy faces downturn with “significant uncertainty”
- Six U.S. states report record spike in coronavirus cases after reopening
- Tensions flare further between North and South Korea
- New Zealand GDT auction yielded 1.9% gain in dairy prices
- New Zealand current account surplus at 1.56B NZD from earlier 2.77B NZD deficit
- Japanese trade deficit narrowed from 1.04T JPY to 0.60T JPY
- Australia’s MI leading index posted 0.2% rebound after previous 1.5% drop
Upcoming Potential Catalysts on the Economic Calendar:
- U.K. inflation reports at 7:00 am GMT
- Eurozone final CPI readings at 10:00 am GMT
What to Watch: GBP/CAD
GBP/CAD has been trending higher on its short-term chart and is currently sitting pretty at the ascending channel support.Inflation figures from the U.K. could determine if a bounce or break would follow, as stronger than expected figures could allow the uptrend to stay intact.
If so, a move back to the channel top at 1.7250 or at least until the mid-channel area of interest at 1.7150 could happen. The 100 SMA is above the 200 SMA to suggest that the rally could carry on while Stochastic is indicating a potential takeover by pound bulls.
Weak results, on the other hand, could stoke BOE easing expectations and spur a reversal from the climb.
Keep in mind that the central bank is already widely expected to increase its asset purchase program, and weak inflation data could convince market watchers that a bigger boost in stimulus is likely.
Not too sure of your entry and stop placements? You can review the average GBP/CAD volatility for clues on how far the pair can move today.