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Canadian Dollar Research Report

Published: Tuesday 03 November 2015

This month the Bank of Canada elected to keep interest rates at 0.5%, so no surprises there. In the statement the bank said that the economy had rebounded, helped by a weaker Canadian dollar that had a positive effect on most industries whilst household spending was expected to expend at a moderate pace. It wasn’t all good news however as the central bank downgraded growth for this and the following 2 years – 1% this year, 2% in 2016 and 2.5% in 2017.
The next interest rate meeting is scheduled for 2nd December and whilst economists expect no change in interest rate there’s still some talk of additional money stimulus occurring down the line. With ongoing weakness in commodities and energy-related business investment and a potential slowdown in the housing sector the possibility of another interest rate cut still exists.
Last week’s August GDP reading came in line with expectations up 0.1%, the third consecutive monthly gain following 5 straight months of contraction but sill growth relatively muted. Key events on the calendar are this Fridays’ unemployment data from both the US and Canada as well inflation data on 20th.
Technically, GBPCAD recovered through October after finding support at 1.9750-1.98 level. It has now broken back above the 20 day moving average as well as the shorter term downtrend (T5) that had been acting as resistance since mid-August. At the moment, the target on the rally is initially 2.04-2.05 (top of the down channel between T3 and T5) and a break above there would open up 2.0550 (Sept high), and potentially retest of August high at 2.10.  On the downside, it’s possible that GBPCAD will pull back to test 2.00 initially and then on to retest bottom of T3 support.
Limit orders at 2.03 on a portion of your funds, or those of you that have shorter term requirements. For longer term buyers target 2.08 level
If it does fail to break above 2.04 it’s likely to trade back to test T5 trendline, possibly down to T3 so initially target 2.00 and then 1.98.