GBPCAD, H4 and Daily
UK January industrial production date came in near to expectations, rising 1.3% m/m and by 1.6% y/y, rebounding from respective prior-month readings of -1.3% and 0.0%. The median forecasts had been for 1.3% m/m and 1.7% y/y growth. The narrower manufacturing output figures came with growth of 0.1% m/m and 2.7% y/y, the latter of which beat the median for a 1.9% y/y rise. UK January trade numbers were also released, showing the mercantile deficit at GBP 12.3 bln and the overall trade figure at GBP 3.9 bln, better than the median forecast for GBP 4.4 bln.
The data have cast little impact on sterling, however currency has been heavy since yesterday, similar to Euro, in the wake of Draghi’s hawkish tweak in the guidance on QE with a dovish leaning press conference. Brexit-related noise continues to spout forth, but remains too inconclusive to impart much directional bias on sterling. The ECB is in the process of formalising a response to the laid-out UK position on Brexit. The next key day is March 22nd, the next EU leaders’ summit, and following that the two sides will look to hammer out a concrete agreement (on a future trading relationship, the Irish border and a transition period) .
Today, GBPCAD continued southwards down to February’s resistance level at 1.7765, after closing yesterday at 112 pips lower from open price. The Canadian dollar rallied yesterday against all major currencies, after the White House revealed that Canada and Mexico would be exempted indefinitely from the U.S. steel and aluminum tariffs. The pair hit a 2-year’s high near the 1.8050 level, fully retracing the decline seen in 2017.
However, the last 2 days, the price action has slipped below 1.7800, retesting February’s resistance level which has been converted into Support level for the pair. The GBPCAD is seen breaking today below 50-period EMA in the 4-hour chart, its lower Bollinger Bands extending further down. The short-term momentum indicators, are currently suggesting the possibility of a retracement of the price action downwards. RSI crossed below neutral, sloping towards oversold territory, while MACD presents an increase of then negative momentum, with MACD lines, reverting to negative area, sloping lower. This is in contrast with the Daily chart, that remains to the bullish side of the pair.
However, if we check the hourly chart as well, we have just identified that the pair presents some signs of rebounding from the immediate support level at 1.7765. Hence if the pair manage to hold above this support and continues to the upside, this could suggests that bulls are back in play. However, with momentum indicators moving to the oversold teritory, ONLY a break above 1.7830, (which is the confluence of 200-period EMS and recent up fractal ) could suggest that down movement is running out of steam. In such case, the price could hit next resistance level at 1.7870. In a longer time-frame, break above 1.7900, could suggest the continuation to the upside.
Meanwhile, if Unemployment data out of Canada today, positively surprise us, could create a bearish path for thepair, with next support levels at 20-DAY MA, at 1.7695 and 1.7650.
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Andria Pichidi
Market Analyst
HotForex
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