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Canadian Dollar Research Report

Published: Thursday 16 November 2017

  • ​​Pound bouncing around all over the place
  • Troubled times for Canadian Dollar
  • Guidance for CAD buyers and sellers
By David Johnson

Pound bouncing around all over the place

The British Pound seems to be bouncing around on a never-ending trampoline in the current market. Any negative word on Brexit, and the Pound drops. Any glimmers of positivity help it back up again. Positive economic data is helping support the Pound a little back up from knee-jerk falls, but there is a great deal of nervousness in the markets around Brexit, UK politics, and the future of the economy, and we are seeing a considerable selling off of Sterling as investors get the jitters.

Troubled times for Canadian Dollar

The Canadian Dollar has recently fallen, too, following disappointing inflation and retail sales data, losing out in particular to the strength of its other key currency pairing, the US Dollar. The Canadian data was forecast to be strong, so this has caught the usually relatively buoyant Canadian Dollar off guard.

The usually buoyant Canadian Dollar has had a few knocks of late, with two interest rate increases from the Bank of Canada (BoC), which certainly surprise the markets. Disappointing economic data didn’t help. Now, Canadian policymakers seem to be pulling back from aggressive changes to policy and taking a more dovish longer-term view, which is weighing on the Canadian Dollar and is likely to put pressure on the Canadian currency in the coming weeks and months, particularly against its key currency pairings, the US Dollar and the British Pound.

The longer-term outlook for the Canadian Dollar may also be affected by a potential downturn in the Canadian housing market and its knock-on effects on the Canadian economy as a whole. The housing situation in Canada has come about following a flurry of regulatory change in both the Canadian financial and housing sectors, along with increasing interest rates. This could all lead to slower Gross Domestic Product (GDP) growth for Canada, which is making markets nervous.

The Canadian Dollar is managing to weather rising oil prices, however. As a commodity currency, the fortunes of the CAD are usually very closely linked to such price changes.

Guidance for buyers

GBPCAD seems to be heading back up to 1.6837 (the high seen two weeks ago), so the best case scenario would be a break through that level and a move up to 1.71 (Oct high); and then fall back from there. It may well not make it that high, however, so suggest targeting 1.68 initially.

Guidance for sellers

It’s worth transferring funds at current levels, as GBPCAD momentum favours a move up for GBP.

Should GBPCAD turn over and head lower, then the initial target on the downside is 1.66 and then down to 1.6380.

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