Today we didn’t have any significant news streaming in either from the UK or Canada that could at least influence the bearing of this currency pair. However, in the course of the week there will be some important releases. Last week was particularly uneventful for the CAD and today signs of possible movement were evident in the London session. As observed over the last couple of days and especially now that political factors/considerations/comments have a lot of impact in the financial markets, the CAD remains resilient over the USD despite US yields outperforming Canadian yields. There are a couple of factors that buoyed the CAD. First, Canadian Prime Minister’s visit to the Washington where Trump emphasized that his focus when it comes to border control was mainly on the southern border-Mexico. This helped ease things temporarily and talk of trade deal renegotiation was put to bed. Plus, the US is the biggest importer of Canadian oil so it’s most a win-win situation for both countries. Secondly, CAD is amongst the commodity dependant currencies and since they are dependent on how the commodity market performs, the CAD got some lift after the recent resurgence in the Copper markets. Also, the WTI Oil wasn’t fairing that badly. Thirdly, there were reports of high direct foreign investment in the Canadian financial markets which strengthened the CAD. FI was at the tune of $160B and this was Canadian securities being purchased. Despite this, most of the time, currency strength caused by this kind of currency movement is very temporary as capital tends to flow from one economy to another-fast.
My trade plan for this pair is to go long and buy the GBP. The reason is purely technical. There is a series of higher highs formed by the stochastics indicator and secondly, there is a buy signal in the oversold zone. I will wait and check if price will breach the support of this bullish flag at 1.62. If price continues to trend higher and close convincingly above 1.634 resistance line and particularly that resistance trend line at 1.645-8, I will go long at the close of this candle stick. Entry as usual will be in the 1Hr chart and my immediate target will be 24.01.2017 highs at 1.66 and if trend continues higher before Theresa May says something about Brexit, I will target 161.8 Fibonacci level at 1.71 which is another area of strong resistance.
For now, trade as follows with entry in the 1HR chart with stochastics buy signal being your trade confirmation:
Sell Limit: 1.6270-1.6300
Stop Loss: Below 1.6220
Take Profit: 1.6620, 1.71
Have a good trading day. Watch out for RBA meeting minutes in approximately 5Hrs time.