Kay Van-Petersen
Kay Van-Petersen, macro strategist at Saxo Capital Markets, digests the market action seen in week 43 and gives his tactical positing. Van-Petersen favours a USD step back, sees gold consolidating, and believes that European equities are overheated.
Short term
Trade view / 14 July 2016 at 12:12 GMT

GBPCAD bounce may awaken the bears

FX Consultant / IFXA Ltd

GBPCAD traders appear to have been positioned for a rate cut from the Bank of England this morning as evidenced by the spike in GBPCAD. GBPCAD soared to 1.7418 from an overnight low of 1.6998. 

What has really changed? The BoE may have left rates unchanged today but August is a "live" date and the stimulus measures that may be taken haven’t been disclosed which leaves plenty of room for speculation. 

In that environment, it is easy to see GBPCAD back at the overnight low.

Yesterday the Bank of Canada surprised many by delivering a rather robust assessment of the Canadian economy, especially for Q3. The BoC expects Q3 real GDP at 3.5%, a big jump from their April prediction of 2.2%.

The intraday GBPCAD technicals are bearish supported by the failure of today’s rally to break resistance in the 1.7420-40 area. The subsequent dip suggests further losses ahead.

Management and risk description 

GBPCAD has always been a volatile currency pair. Post-Brexit GBPCAD has upped the ante. The stop is vulnerable to a drop in oil prices leading to a USDCAD rally. It is also vulnerable to the next bout of risk aversion. Friday’s speech by BoE governor Mark Carney could lead to the stop being triggered, especially if he adopts a less than dovish tone.


Entry: sell 1/2 position of GBPCAD at market (1.7290), balance at 1.7360.

Stop: 1.7422.

Target: 1.7060.

Time horizon: five days.

GBPCAD 30-minute with second sell level shown:
Source: Saxo Bank 

GBPCAD four-hour showing downtrend and cap of today’s rally:
Source: Saxo Bank 

GBPCAD five-year daily with moving averages:

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Source: Saxo Bank

— Edited by Michael McKenna

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Non-independent investment research disclaimer applies. Read more


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