With a light calendar ahead and the holiday environment right around the corner, today’s GDP from Canada and Sterling’s momentum is one of the few setups to watch.
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Fresh Market Headlines & Economic Data:
- U.S. durable-goods orders sink in November; decline is sharpest in six months
- The Chicago Fed National Activity Index (CFNAI) was +0.56 in November, up from –0.76 in October.
- Canada economy shrinks for first time in eight months, hit by U.S. auto strike
- China will lower import tariffs on over 850 products from January 1, finance ministry says
- Oil steadies near $66 as Russia touts easing OPEC+ output
- China considering more RRR cuts to lower financing costs: Premier Li
- ECB’s Knot says low rate policy risks becoming counterproductive
- German Import prices in November 2019: -2.1% on November 2018
- Australia Private sector credit for November inline with the previous read of 0.1%
- Japan All industries activity comes in at -4.3% in October vs. a +1.9% rise in September
- BOJ to revamp ‘tankan’ survey to add details on FX rates
Upcoming Potential Catalysts on the Forex Calendar for U.S. & Asia:
- Bank of Japan Monetary policy meeting minutes at 11:50 pm GMT
- Richmond Fed manufacturing index at 3:00 pm GMT (Dec. 24)
- API Crude oil inventories at 9:30 pm GMT (Dec. 24)
What to Watch: GBP/CAD
Traders definitely seem to be in holiday mode as FX volatility has been quieter than usual. But we are seeing a little bit of action in GBP/CAD with a little bounce in the works after a disappointing monthly GDP read from Canada. This actually sets up a potential swing opportunity for the bulls, while the bears may see a swing opportunity form from today’s price action sometime this week.
First, if you’re a bull on GBP/CAD, the argument for a continued short-term bounce could be some end-of-year profit taking on Sterlings recent run lower combined with today’s disappointing GDP data from Canada. We’ve also got a technical setup in that we’re seeing a bullish divergence between price action and the stochastic indicator that could draw in technical buyers short-term. With a daily ATR of around 150 – 160 pips, the recent resistance around 1.7200 is a reasonable target if volatility picked up on surprise geopolitical news (U.S.-China trade or Brexit updates) within the next session or two.
If you’re a bear on GBP/CAD, the trend is still in your favor but the arguments for a bounce shouldn’t be ignored. It’s probably a good to wait for a bounce to materialize and if the pair does retest the previous resistance area around 1.7200 and reversal patterns emerge, then it looks like an opportunity to play the major longer-term themes at a better price, if you think the environment will continue for the next week or so.