Canadian Dollar Forecast to Extend Weakness Against Sterling and US Dollar
One of Canada’s leading foreign exchange technicians tells us the Pound to Canadian Dollar exchange rate (GBP/CAD) remains in a technical uptrend and any weakness should be limited.
“GBPCAD remains firm, with the GBP regaining support today after briefly consolidating yesterday,” says analyst Shaun Osborne at Scotiabank.
The Pound started the week at 1.7670 and trades at 1.7731 at the time of writing.
The exchange rate has been rising since it rose off a multi-year low at 1.5734 in January.
“The cross is trading positively on the day so far (bullish outside range at the moment) but the market has not traded through Friday’s high. The broader trend is positive and GBPCAD enjoys the support of strongly trending, short, medium and longer run trend oscillator signals,” says Osborne.
According to the analyst this means that the scope for counter trend corrections should remain limited, the GBP can be expected to continue climbing and that minor dips are a buy.
“The sustained moved through 1.7521 retracement resistance implies the rally should move up to the 1.79/1.80 area,” says Osborne.
USD/CAD to Stay Bullish
The Canadian Dollar retains a soft bias as we move through the midweek sessions.
USD/CAD is seen down 0.2% and remains in touching distance of this week’s fresh 14 month low.
“Downside risk is elevated as interest rate differentials widen in a CAD-negative manner and as oil prices test fresh one month lows,” says analyst Eric Theoret at Scotiabank.
The important two-year U.S.-Canada spread ended Tuesday just above 58bpts and appears set to push beyond the ~60bpt high from January 2016 to reach levels last seen in 2007.
Meanwhile, oil prices which had provided a crucial offset to the drag from spreads, appear vulnerable below the 200 day MA support level.
“We remain bullish USDCAD (bearish CAD) targeting 1.40 for Q2 with expectations of a slight moderation to 1.38 for Q3 and 1.36 for Q4,” says Theoret.
