GBP/CAD hits the top of today’s watchlist with Loonie still seeing elevated volatility and top tier economic events ahead from both the U.K. and Canada. Is a new leg higher in the works?
Intermarket Snapshot
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Fresh Market Headlines & Economic Data:
- U.S. Industrial production rose 0.6% in Aug & Capacity utilization for the industrial sector increased 0.4% to 77.9%
- U.S. homebuilder sentiment surges to highest level of the year, but there are warning signs
- Canadian manufacturing sales decreased 1.3% to $57.2 billion in July, following a 1.4% decline in June.
- Oil drops 5% on report Saudi oil output will return to normal faster than initially anticipated
- U.K. Supreme Court weighs whether Boris Johnson broke the law in suspending Parliament
- German economic outlook remains negative despite improved investor morale: ZEW
- SECO is forecasting GDP growth of 0.8% for 2019 and 1.7% for 2020 (June forecast: 1.2% and 1.7%)
- Australian house prices fall -0.7% in the Mar. to Jun quarter; -7.4% y/y
- RBA Meeting minutes shows openess to further easing
- New Zealand consumer confidence down 0.4 points to 103.1 in September
Upcoming Potential Catalysts on the Forex Calendar:
- Japan Trade balance at 12:50 am GMT (Sept. 18)
- Australian Leading index at 1:30 am GMT (Sept. 18)
- U.K. inflation & retail sales at 9:30 am GMT (Sept. 18)
- Euro area consumer prices at 10:00 am GMT (Sept. 18)
- U.S. Building permits & housing starts at 1:30 pm GMT (Sept. 18)
- Canadian consumer prices at 1:30 pm GMT (Sept. 18)
What to Watch: GBP/CAD
The Canadian dollar is taking a dip lower on news that Saudi oil output will return to normal faster than initially anticipated, and as mentioned in the intro, we’ve got top tier economic events from both the U.K. and Canada in the form of inflation updates–critical inputs to developing a monetary policy outlook and decisions for central banks. So, GBP/CAD is definitely one to watch with odds being that volatility will stay bid for the next session, and in terms of price, we’re seeing the pair bounce off of the Fibonacci retracement area from the most recent swing higher.
If you’re a bull on GBP/CAD and expect the U.K. to beat lowered expectations on prices while Canada disappoints on theirs, with this type a chart you can consider scaling into a long position from current levels down to the broken minor resistance level (1.6360) / 61% Fibonacci retracement level. This is a swing type setup that makes sense if you’re also bullish on the upcoming Bank of England monetary policy meeting on Thursday and/or you think oil will continue to fall from this week’s spike higher on geopolitical catalyts.
If you’re a bear on GBP/CAD and expect weak U.K. price growth vs. Canada surprising the market with better-than-expected inflation numbers, then a break below that minor area of interest around 1.6360 should be first on the watchlist, but you can also consider a retest/reversal at the previous swing highs (around 1.6607) as a signal to short the pair. Keep in mind the daily ATR is in the range of around 160 pips, so you’ll have to give this pair room to breathe, especially with the potential for Brexit-related news to pop up at any time.