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!
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Fresh Market Headlines & Economic Data:
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Australia Consumer inflation expectations at 1:00 am GMT (Sept. 10)
What to Watch: GBP/CAD
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.
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.