GBP/CAD is sporting a simple technical setup ahead of potential catalysts in the form of inflation updates from both the UK & Canada.
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Fresh Market Headlines & Economic data:
- Super Mario’ shock: euro slides, yields hit new lows
- U.S. housing starts fall, but prior months revised up
- Canadian manufacturing sales declined 0.6% to $57.8B in April, following a 2.6% increase in March
- Oil prices slip for second day on global growth worries
- Global dairy price index falls -3.8%
- Hammond ‘prepared to resign’ over May’s spending plans
- Johnson gets new boost in race to become UK prime minister
- Bank of England official flags risk of capital flight from UK
- Euro zone inflation confirmed slowing to one-year low in May: Eurostat
- EU trade surplus with U.S. expands, deficit with China larger
- German investor morale drops on weak data, headwinds from abroad – ZEW
- Merkel: Iran must uphold nuclear deal, or face consequences
- RBA Says Further Rate Cut ‘More Likely Than Not’ in Period Ahead
- Australian house prices drop in every capital city
- Darkening mood among Japanese manufacturers flags risks ahead – Reuters Tankan
- Japan government sticks to ‘moderate’ economic view despite global risks
- Kuroda says BOJ will debate rising overseas economic risks this week
Upcoming Potential Catalysts on the Forex Calendar:
- New Zealand current account at 11:45 pm GMT
- Japan trade balance at 12:50 am GMT (June 19)
- Australia leading index at 1:30 am GMT (June 19)
- German PPI at 7:00 am GMT (June 19)
- Euro area current account at 9:00 am GMT (June 19)
- U.K. inflation at 9:30 am GMT (June 19)
- Canada CPI at 1:30 pm GMT (June 19)
What to Watch: GBP/CAD
Keeping it simple for today’s watchlist with this textbook downtrending market on GBP/CAD. The pair has been in a momentum move lower since topping out at the beginning of May around the 1.7700 handle, now trading around 1.6700 for a 5% drop in just over a month (big move in currency world).
The pair did recently find broad support and bounce around 1.6800 just a week ago, but we’re back retest the swing lows and odds are favoring the bears that this support area could break.
Fortunately, we’ve got top tier catalysts ahead for a potential momentum move this week: inflation data from both the U.K. and Canada. This data point normally plays a big role in monetary policy decisions, so if we see surprises from expectations or revisions to previous numbers, it’s highly likely currency traders are going to make moves.
So if you’re a bear, look for a weak update from the U.K. and positive one from Canada before considering a short position. And since the trend is with the bears on this one, you could consider preemptive positioning with a nibbler position or orders ahead of the data release. Just remember that the daily ATR is around 110 – 120 pips on this one so adjust exits appropriately.
If you’re a bull, a better-than-expected U.K. inflation update would be a big surprise, and a break above the falling ‘lows’ would definitely have to go on the watchlist for a retest and bounce higher setup. Or for the bolder traders out there, a straight resistance break could be considered to enter a long position right away. Just remember that daily ATR range and the increased probability it could be hit given the importance of these data points.