Both the U.K. and Canada have inflation and consumer spending reports lined up, so I’m counting on extra volatility for GBP/CAD.
Do you think the pair can sustain its neckline breakout?
Here’s what I’m seeing on the 4-hour time frame:
GBP/CAD 4-hour Forex Chart by TV
How will this week’s CPI and retail sales releases impact GBP and CAD?
Remember that directional biases and volatility conditions in market price are typically driven by fundamentals. If you haven’t yet done your fundie homework on the British pound and the Canadian dollar, then it’s time to do some work by checking out the forex calendar and stay updated on daily fundamental news!
Another dip in price pressures is eyed for both the U.K. and Canadian economy in November, more so for the former. Analysts are counting on a decline from 4.6% to 4.3% year-over-year for the headline U.K. CPI while Canada might report a meager 0.1% dip month-over-month.
Later on, Canada is slated to show a slight pickup in retail sales for October while the U.K. might also print a decent rebound in consumer spending. However, weaker than expected results from the Brits might be enough to accelerate the selloff on GBP/CAD.
The pair already broke below its head and shoulders neckline visible on the 4-hour chart, suggesting that a downtrend of the same height as the reversal pattern is due.
The 100 SMA is above the 200 SMA for now, but the gap between the moving averages is narrowing to hint at a potential bearish crossover. However, there may still be some bullish pressure in play since Stochastic is indicating exhaustion among sellers and could just be gearing up for a move higher.
Then again, this might simply spur a retest of the broken neckline support near the Pivot Point level (1.7010) and the 1.7000 major psychological mark. Holding as resistance could send GBP/CAD down to the downside targets at S1 (1.6870), S2 (1.6810) or all the way down to S3 (1.6670).