Canadian Dollar Forecasts: GBP to Strengthen but CAD Gains Seen v EUR and USD
Where is the CAD likely to travel next against the British pound, euro and US dollar? We ask some of the industry’s leading analysts for their professional guidance.
According to one analysis the British pound is now due a comeback against the Canadian unit after forming a base to recent declines.
Meanwhile, it looks as though both the euro and US dollar are destined to suffer further weakness.
That said, beware the risks posed by the FOMC meeting outcome due on Thursday; this could be a fundamental gamechange to USD-CAD's outlook.
Nevertheless:
- At the time of writing the pound to Canadian dollar exchange rate (GBP-CAD) is trading at 1.8518.
- The euro to Canadian dollar exchange rate (EUR-CAD) is at 1.3372.
- The US to Canadian dollar rate (USD-CAD) is at 1.1978.
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Pound Sterling v Canadian Dollar Forecast
The pound has been trending lower against the CAD since February.
We see little reason to fight the trend, at least until the UK elections have passed and currency markets are allowed to focus on fundamentals once more.
However, the GBP could be due a comeback says one analyst who has noted the UK currency has been quietly forming a base of late.
Shaun Osborne at TD Securities has given his latest opinion on GBP-CAD:
“GBPCAD managed to stage a rally last week for its first net weekly gain since late February. We suggested last week thatthe GBP was due a bounce after nearly two months of persistent selling and we have long viewed the dip back from 1.90+ levels as corrective which would possibly extend to the 1.83 area to retest the broader bull break out that occurred at the start of the year.
“Last week’s developments legitimized both the latter and former views via a bullish weekly reversal (engulfing line on the weekly candle) just as the market tested the 40-week (200-day) MA and the January break out. No follow through yet this week but we are now bullish GBPCAD.”
US Dollar v Canadian Dollar Forecast: Bearish Bias
Is the party over for the USD? At the time of writing the 1.20 region has broken suggesting further declines lie ahead.
Luc Luyet at Swissquote Bank notes that the US v Canadian dollar pairing has broken down into a bear trend:
“USD/CAD is trying to bounce near hourly support at 1.2088.
“However, the recent break to the downside out of the multimonth consolidation phase favours a bearish bias. Another support can be found at 1.2000 (psychological support). Resistances lie at 1.2306 and 1.2445 (14/04/2015 low).
“In the longer term, the break of the key support at 1.2352 (03/02/2015 low) indicates increasing selling pressures, which favours further medium-term weakness. As a result, a significant top has likely been made at 1.2835 (18/03/2015 high). Supports can be found at 1.2000 (psychological threshold, see also the 38.2% retracement) and 1.1731 (06/01/2015 low).”
According to Osborne:
“The broader technical picture remains challenging for the USD. Bear trend momentum on the 1– and 6-hour charts is reflected on the daily patterns too; this should keep the tone corrective (USD weaker) for the next week or two at least. We continue to target a drop to the 1.19 zone, reflecting the break under the 1.2360 double/triple top trigger earlier in April.
“However, we have to recognize the risk of an overshoot. Broader technical patterns are negative too and the “dead cross” on the 28– and 40-day MA signals warns of a more severe dip in the USD in the next few weeks. Taking back half of the 1.06/1.28 rally would see USDCAD test the low 1.17s. A 2/3 retracement would challenge 1.14.”
Euro v Canadian Dollar Forecast: The Bear Trend Persists
While we have seen some plucky action by the EUR in recent weeks, the outlook remains decidedly negative according to studies of trend momentum.
While the Euro has been afforded relief against other majors we see this more symptomatic of weakness in the dollar.
Ultimately, the CAD is likely to prevail.
Technically speaking, Osborne acknowledges that EURCAD has consolidated over the past two weeks, with dips under 1.31 attracting EUR bids and relieving the build-up of bear pressure on the cross on the short-term charts.
“The broader bear trend persists, however, and remains well-entrenched on the longer-term charts; we rather think scope for EUR gains is limited at the moment. We look for strong resistance to EUR rebounds between 1.3400/50 and rather think that levels nearer 1.33 should cap near-term gains,” says Osborne.
TD Securities still favour the downside here overall; price signals suggest a pause in the trend certainly but there is no strong evidence of a reversal at this point.
“Look to fade EUR rallies,” says Osborne.
