Pound-to-Canadian Dollar Rate: 5-Day Technical Forecast, Events and Data for the Coming Week
Our technical studies suggest the Pound-to-Canadian Dollar exchange rate is likely to extend lower as the near-term outlook favours more Canadian Dollar strength.
GBP/CAD has just found support at the level of the 50-day moving average at 1.6370, after declining all of last week.
The 50-day MA is likely to act as an obstacle to further downside, however, a break below the 1.6348 lows will probably lead to a continuation lower, to the next target at 1.6300.
A further break below 1.6285 will probably lead to the next target at 1.6200.
The MACD has crossed its signal line giving a further bearish signal, and supporting the downtrending bias.
Our bearish forecast echos that of Scotiabank's, FX Strategist, Shaun Osborne, who says the following:
"We look to further weakness toward the lower 1.62 area around the late July low and the last major retracement level of the early 2017 rally. Momentum indicators have only just fallen into bearish territory, leaving ample space for acceleration. We remain bearish GBPCAD."
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Events and Data for the Canadian Dollar
There is a housing slant to data from Canada in the week ahead.
The week kicks off with Housing Starts and Building Permits on Tuesday October 10 at 13.15 (BST).
Housing Starts in September are projected to come out at 210k from 233k in the previous month.
The New House Price Index, meanwhile, is out at 13.30 on Wednesday October 11, and top show a 0.3% rise in August.
Recent data for the Canadian Dollar has been mixed.
"News was mixed out of Canada with Employment Change missing the 13.9K forecast coming in at 10.0K while Unemployment Rate was a narrow beat at 6.2% vs. the expected 6.3%. Ivey PMI was the biggest beat on the day coming in well ahead of the 56.0 forecast at 59.6," said Olympia FX.
Another analyst noted how the labour market, though showing an additional 10k jobs added on Friday, had nevertheless, slowed since the beginning of the year.
"September saw the labour market add 10K positions, a figure that was in line with consensus and kept the jobless rate at 6.2%. That’s about a third of the pace seen in the first half of the year," said CIBC Economics.
News and Data for the Pound
Politics was the main driver of Sterling in the previous week and it will probably once again be the main driver in the week ahead.
Sterling lost ground as a result of Prime Minister May's leadership coming under criticism, and whilst there are no signs she will resign the flak has weakened her position.
Over the weekend we have noted that the Conservative Party has rallied around May and her position looks to be secure once more and as noted by Viraj Patel at ING Bank N.V. this might offer Sterling some upside.
The coming week is a key time for Brexit negotiations as it will be the last week of talks before the EU summit to determine whether sufficient progress has been made to move onto phase two.
The consensus expectation is that progress will not be judged sufficient to move on.
"Barring any surprising breakthroughs, the EU27 is almost certain to vote that insufficient progress has been made to move onto the 2nd stage of negotiations," said Canadian investment bank TD Securities.
The most important had data to be released is Manufacturing and Construction Output data for August at 9.30 BST on Tuesday, October 10.
TD Securities, again, think there is a substantial chance of a deeper decline than the markets are expecting.
They say that although Manufacturing rose in June for the first time in 2017 they expect the gains to be at least partially retraced in August due to a fall in car sales.
They are also skeptical about the Construction Output result for August, saying that despite their model indicating an uplift due to a delayed effect from strong mortgage and house price data before, more recent Construction PMI's point to a decline.
Other releases to keep an eye on in the coming week are the Royal Institute of Chartered Surveyors (RICS) house price monitor at 00.01 on October 12; the Trade Balance at 9.30 on Tuesday, October 10 and the British Retail Consortium's (BRC's) Retail Sales Monitor on Tuesday at 00.01.
