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The pressure on Sterling continues thanks to Brexit concerns, making the downtrend in GBP/CAD one to watch, especially as volatility picked up in CAD after the latest monetary policy decision from the Bank of Canada.

Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on CAD/JPY ahead of the BOC monetary policy statement, so be sure to check that out to see if there is still a potential play!

Intermarket Snapshot

Equity Markets Bond Yields Commodities & Crypto
DAX: 13229.93 +2.02%
FTSE: 6030.85 +1.70%
S&P 500: 339877 +2.01%
DJIA: 27965.74 +1.69%
US 10-YR: 0.669% -0.054
Bund 10-YR: -0.465% +0.03
UK 10-YR: 0.228% +0.039
JPN 10-YR: 0.026% -0.014
Oil: 37.04 +0.76%
Gold: 1950.20 +0.48%
Bitcoin: 10245.54 +1.47%
Ethereum: 349.87 +4.21%

Fresh Market Headlines & Economic Data:

Bank of Canada maintained the overnight rate at 0.25% and continues QE program of $5B per week of Government of Canada bonds.

U.K. Publishes Legislation That Breaches International Law

Oil prices reverse some losses but demand concerns persist

The number of U.S. job openings increased to 6.6M on the last business day of July, the U.S. Bureau of Labor Statistics

U.S. Mortgage applications increased 2.9 percent from one week earlier

Canada housing starts rose 6.9% in August

Top Senate Democrat says good chance coronavirus aid bill will pass

EU’s Dombrovskis Presses U.S. to Scrap Tariffs Over Airbus Aid

EU says trust needed if talks with UK are to continue

Swiss unemployment rate rose from 3.2% in July 2020 to 3.3% in August

Upcoming Potential Catalysts on the Economic Calendar

API Crude oil inventory at 8:30 pm GMT
Japan Machinery Orders at 11:50 pm GMT
Australia Consumer inflation expectations at 1:00 am GMT (Sept. 10)

What to Watch: GBP/CAD

GBP/CAD 1-Hour Forex Chart
GBP/CAD 1-Hour Forex Chart

On the one-hour chart above of GBP/CAD, we can see the strong trend lower that started last week as rising Brexit uncertainty began to weigh on the British pound.

That theme doesn’t seem to be going away any time soon as we get more headlines fueling that uncertainty, most notably today’s news of the U.K. putting together legislation that breaks international law. 

And volatility could remain with GBP/CAD for the remainder of the session as traders manage risk after the latest monetary policy decision from the Bank of Canada (no changes of note) and the upcoming oil inventory data.

So, both the price trend and the fundamentals are currently favoring the Loonie over Sterling at the moment, and if you continue to be a bear on the pair, then this bounce over the last few hours may present an opportunity to play the trend lower at a better price.

Buyers took back control after a brief retest of the major psychological area around 1.7000, possibly more on profit-taking than a shift in sentiment. if that’s the case, we may see sellers jump back in one or two ATR (around 130 pips) away from that area, roughly around the 1.7160 level up to the broken support area around 1.7250.

Bearish reversal patterns there combined with overbought stochastic signals and a dip in oil inventory numbers are likely the scenario to draw in sellers in that area.

For the bulls, this bounce back could have legs in this bounce, not only on bearish Sterling profit-taking but possibly on the pricing in of the continued dovish tone from the Bank of Canada in their latest statement.

A break above the resistance area around 1.7250 above won’t likely come within the next session or two without a major surprise catalyst, so the setup to watch out for is a retest of today’s swing lows and bullish reversal patterns at that area, on top of a rise in oil inventory data.