Is the Pound to Canadian Dollar Set for a Rebound as Key Supports Come into Play?

Traders' Opinions

Summary:

The Pound to Canadian Dollar exchange rate faces a challenging week following a substantial 1.0% drop on the previous Friday, signaling a breakdown in the technical outlook. However, robust support zones, particularly around key moving averages, suggest limited downside potential

SELL GBPCAD

Close Time

CLOSED

1.70000

Entry Price

1.66500

1.71400

1.78876 -0.00684 -0.38%

93.3

Pips

Profit

1.66500

1.69067

Exit Price

1.70000

Entry Price

1.71400

The Pound to Canadian Dollar (GBPCAD) enters the upcoming week on uncertain ground, grappling with a notable 1.0% decline recorded on the preceding Friday. This downturn has triggered a reevaluation of the technical landscape, emphasizing the pivotal role of the USD to CAD exchange rates in recent market movements. At the time of writing, the GBPCAD stands at 1.6943, positioned just above the critical 100-day moving average (DMA).

Fundamental Factors at Play

In the backdrop of technical considerations, market participants are closely eyeing inflation figures on both sides of the Atlantic. On Tuesday at 13:30 GMT, Canadian inflation data is set to release, with expectations of a 2.9% year-on-year increase in November. A figure below projections could exert pressure on the Canadian Dollar as anticipation grows for potential Bank of Canada rate cuts in 2024.

Simultaneously, Friday brings the release of Canadian GDP figures, forecasting a 0.2% month-on-month increase for October. A shortfall in these numbers might signal economic cooling, opening the door for a rate cut in the first half of 2024.

On Wednesday at 7 AM GMT, the focus shifts to the UK as CPI inflation data is unveiled, projecting a 4.4% year-on-year reading for November. A miss in these figures may lead to Pound depreciation during the midweek session. Additionally, retail sales and quarterly GDP figures later in the week will provide further insights into the economic health of both nations.

Technical Analysis

Is the Pound to Canadian Dollar Set for a Rebound as Key Supports Come into Play?_1

The technical analysis supports a bearish outlook, emphasizing a bearish bias confirmed across weekly, 4-hour, and 1-hour timeframes. The breach of the 1.69858 daily support, coupled with a retest as resistance, has solidified this bearish sentiment. Notably, a bearish engulfing candlestick on the 1-hour chart served as an entry signal for traders adopting a bearish stance on GBPCAD.

TRADE RECOMMENDATION

SELL GBPCAD

ENTRY PRICE : 1.700

STOP LOSS : 1.71400

TAKE PROFIT : 1.665

Risk Warnings and Disclaimers

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Chandan Gupta

Forex

Summary:

Anticipation surrounds the Bank of Japan's decision, likely prompting market shifts. Post-announcement, sudden moves may occur before a holiday-induced slowdown reduces liquidity. With fewer participants during the holidays, market activity quiets, potentially fostering increased volatility. Staying attentive to these developments can help navigate potential fluctuations amid the anticipated market lull.

BUY USDJPY

EXP

EXPIRED

102.026

Entry Price

102.576

101.767

155.333 +0.567 +0.37%

Pips

EXPIRED

101.767

143.892

Exit Price

102.026

Entry Price

102.576

Fundamental analysis

It is important to remember that while the value of the US dollar may decline somewhat, the Japanese yen may be somewhat unpredictable.

At the end of the day, the focus remains on the bond market and what will be announced in Tokyo next week.

Now that the Fed has shown it is willing to cater to Wall Street's appetite for cheap money, it will depend on whether Japan follows suit.

If that happens, it could have a significant impact on the Japanese yen, but given past monetary easing policies, this is not certain.

I think there are a lot of people who are worried about that, so I'm a little hesitant to get involved right now.

Finally, we are nearing a time when liquidity will become scarce.

Obviously, the market has a lot to deal with next week that could impact next year.

The current situation suggests that everyone is waiting for the Bank of Japan's decision, after which we may see some sudden moves, but then a slowdown towards the holidays and Liquidity may decrease.

I'm not too excited about trading this pair at the moment as there is a lot of uncertainty next week.

We expect some ups and downs in the short term, but things seem pessimistic at the moment.

If I have to trade, I will look for glitches that I can exploit.

However, keep in mind that if you are patient and hold the pair for the long term, there may still be a chance to profit.

Technical analysis

The dollar/yen pair struggled in early trading on Thursday, dropping below the 142 yen level, but it is currently unclear whether the pair will be able to maintain this position.

It is moving around important trend lines, but it is also below the 200-day exponential moving average.

The focus of market participants is on the Bank of Japan meeting to be held next week.

If the Japanese decide to change monetary policy, it could have a significant impact, especially since the Federal Reserve appeared to be leaning towards easy monetary policy on Wednesday.

Trading Recommendation

Trading Direction: Long

Entry Price: 102.026

Target Price: 102.576

Stop Loss: 101.767

Risk Warnings and Disclaimers

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Eva Chen

Central Bank

Forex

Summary:

The AUDUSD extended its intraday gains to 0.50%. Last week was a stellar week for the AUD. Driven by the moderate statement of the Federal Reserve and strong domestic employment data, the AUDUSD rose by 2.07% overall.

BUY AUDUSD

Close Time

CLOSED

0.67064

Entry Price

0.68370

0.66100

0.62118 -0.00118 -0.19%

130.6

Pips

Profit

0.66100

0.68370

Exit Price

0.67064

Entry Price

0.68370

Fundamentals

Last Friday, after China released strong data, the AUDUSD continued to rise. Following the growth of 4.6% in October, China's industrial production soared by 6.6% in November, higher than the market expectation of 5.6%. This is the highest level since February 2022.

In China, the retail sales in November increased by 10.1% YoY, higher than the increase of 7.6% in October, but lower than the market expectation of 12.5%. This marks the 11th consecutive month of growth and the fastest expansion since May. These data are an encouraging sign that China's economy is responding to the government's stimulus measures after a difficult period in the third quarter.

In addition, the latest PMI data also boosted the AUD. The data shows Australia's manufacturing and service industries improved slightly in December. The PMI manufacturing index rose slightly from 47.7 to 47.8, while the PMI service index rose from 46.0 to 47.6. The PMI of integrated manufacturing and service industries also rose from 46.2 to 47.4. Despite some growth, all indexes are still below the threshold of 50.0 to distinguish expansion and contraction, indicating that these two industries still face challenges.

On the employment front, Australian employment growth was strong in November, with the economy adding 61,500 jobs, exceeding expectations of 11,500. This suggests that the labor market remains resilient despite higher interest rates.

For the Reserve Bank of Australia (RBA) and the Department of the Treasury, these data are consistent with the soft landing view of the economic outlook. There is little sign that the economy may fall into a more serious recession next year. Most importantly, strong employment indicates that the economy may show resilience in 2024. While employment and income are expanding, it is difficult to see a sharp decline in the economy.

The RBA reiterated that the interest rate decision will depend on the data, and the strong employment release supports the RBA to maintain its tightening tendency. As the inflation rate is 5.4%, far higher than the target of 2%, RBA President Bullock warned that the RBA may continue to raise interest rates. However, the market does not buy it and has digested the impact of the easing policy in 2024 by about 50 basis points.

Last week, we also saw the disconnect between the market and the Federal Reserve. At Wednesday's meeting, Federal Reserve Chairman Powell reiterated that he might raise interest rates if necessary, which seems to be just lip service because he has hinted that the Fed is expected to cut interest rates three times in 2024. The market is more dovish and has digested the expectation of six interest rate cuts.

To this end, the AUDUSD experienced an amazing rebound last week, rising to 0.6727 on Thursday, the highest level since the end of July, which is in line with our previous expectations. The better-than-expected data on China's retail sales and industrial production increased the positive prospects established after the dovish Federal Reserve.

Bullish Technical Studies Lay Solid Foundation for Further Uptrend_1

Technical Analysis

After a failed reversal attempt earlier this month, the bulls broke above the resistance trendline from April 2022 with strong momentum. Bullish technical studies and positive fundamentals will continue to support the move and pave the way for an extension to the next target range of 0.6800.

The AUDUSD is still biased to the upside despite the weakening MACD momentum in the 4H timeframe. This means that the decline from 0.7156 to 0.6269 has ended. A further rebound should test the next resistance at the 0.6800 range. Meanwhile, the near-term outlook will remain cautiously bullish in case of a pullback as long as the 0.6524 support level holds.

From a broader perspective, we have yet to confirm that the downtrend from 0.8006 (2021 high) is complete. The price action at 0.6169 (2022 low) could just be a medium-term corrective pattern. The rise from 0.6269 is seen as the third wave of the uptrend of the pattern. For now, range trading should fluctuate in the range of 0.6169 to 0.6800 before further development.

Overall, the AUDUSD maintains a bullish bias. While the economy may be slowing down after the recent sharp rebound, bulls are likely to focus their attention on the threshold of 0.6800 in the coming sessions. It is recommended to buy the dips.

Trading Recommendations

Trading direction: Long

Entry price: 0.6705

Target price: 0.6837

Stop loss: 0.6610

Deadline: 2024-01-01 23:55:00

Support: 0.6693, 0.6664, 0.6621

Resistance: 0.6739, 0.6781, 0.6822

Risk Warnings and Disclaimers

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Saif

Forex

Summary:

The CPI inflation rate in both countries leads the market

SELL EURCAD

Close Time

CLOSED

1.46542

Entry Price

1.45338

1.47171

1.48824 -0.00381 -0.26%

21.4

Pips

Profit

1.45338

1.46328

Exit Price

1.46542

Entry Price

1.47171

Fundamental analysis

Fundamentally in this pair, We will witness the data release CPI inflation rate in Europe with negative expectation unchanged remaining the same at 4.2% This figure will keep the euro weak as it, On the other hand, we have a CPI inflation rate in Canada going to be released within few days with the positive expectation to increase to 3.1% from 2.8% and if this figure became an actual figure Means the interest rate in Canada will keep unchanged high at 5.0% this will give strength for the Canadian dollar.

Eurozone Core CPI Final YoY

Fcst: 4.2%

Will the High Inflation in Canada Keep the EURCAD in a Downtrend?_1

Canada CPI YoY

Prev: 3.1%

Fcst: 2.8%

Will the High Inflation in Canada Keep the EURCAD in a Downtrend?_2

Technical analysis

In this 4-hour diagram chart, the market price is 1.46168 we expect the price to move up to the previous supply zone at 1.46800 and from there we expect the price to turn back down to the old demand zone at 1.45300 following the daily chart downtrend with 20 moving average pointing down.

Trading Recommendation

Trading Direction: Short

Entry Price: 1.46542

Target Price: 1.45338

Stop Loss: 1.47171

Risk Warnings and Disclaimers

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Eva Chen

Forex

Central Bank

Summary:

A day before the Bank of Japan's (BOJ) interest rate decision, the USDJPY overnight implied volatility jumped to 33.23%, the highest level since July 27.

BUY USDJPY

Close Time

CLOSED

142.953

Entry Price

146.580

140.800

155.333 +0.567 +0.37%

140.3

Pips

Profit

140.800

144.356

Exit Price

142.953

Entry Price

146.580

Fundamentals

The BOJ will announce its final policy decision this year on Tuesday. BOJ Governor Ueda Kazuo said earlier that the BOJ's policy will be difficult to maintain from the end of the year, which triggered people's expectation that the BOJ will finally bid farewell to negative interest rates, but the possibility of the BOJ withdrawing from negative interest rates this week is slim. Investors are eager to hear more details about how and when the BOJ will withdraw from the negative interest rate field. Because the specific details about the changes in the BOJ's policies or inflation prospects may lead to rapid fluctuations in the JPY market.

As many BOJ policy board members have pointed out, uncertainties abound. The data shows that Japan's economy is still fragile and inflation is falling. In addition, the JPY, which is regarded as a factor that may change the dovish policy stance of the BOJ, is no longer as weak as it was in October and November.

At the same time, Japanese government bonds will also face turmoil. The overnight index swap linked to the BOJ's interest rate decision date shows that the possibility of ending the negative interest rate policy this week is almost zero. However, the market still shows nervousness, and the implied volatility of the USDJPY and the two-year overnight index swap of the JPY are both at a high level.

Since the BOJ made its last decision on October 31, the performance of short-term national debt is not as good as that of long-term national debt. If the policy does not change tomorrow, the JPY may weaken at first, but this trend may be reversed if BOJ Governor Ueda Kazuo hints that he will withdraw from negative interest rates. The yield of Japanese government bonds (especially short-term government bonds) may rise sharply because the liquidity of the Japanese government bond market usually becomes weaker during the European session (after Ueda Kazuo's speech).

On the other hand, investors may reduce their bets on the Fed's interest rate cut, which will help the USDJPY rebound. The market currently expects the Fed to cut interest rates by 150 basis points in 2024, significantly ahead of the Fed's dot plot expectations. This may be because investors expect the U.S. economy to slow down and need to cut interest rates sharply.

At present, the chances of the U.S. falling into recession are very low, which means that the expectation of a 150-basis-point interest rate cut may be too high. If the market adjusts and expects the Fed to cut interest rates by 75 basis points, the USDJPY may rebound to about 145.00.

Trade in Fluctuations as This Is Not a Traditional Sell-Off_1

Technical Analysis

Since the peak of the USDJPY on November 13, it has been in a state of sharp fluctuation and decline. However, the current decline of the USDJPY is similar to that since the Japanese Ministry of Finance intervened in the market last year, but there is no more comparability. Because the current decline is not due to the investment of funds, it is entirely based on the selling made by institutions following policy expectations. With an understanding of this, we can then trade the USDJPY more comfortably.

The USDJPY intraday bias remains neutral as the consolidation from 140.94 is expanding upwards. A stronger recovery cannot be ruled out. However, the upside should be limited to well below the 146.58 resistance to bring another decline. On the downside, a break below 140.94 would resume the downtrend from 151.89 to the next Fibonacci level at 136.63.

In the bigger picture, the decline from 151.89 is seen as the third wave of the retracement pattern from 151.93 (2022 high). Further decline would bring the price to 136.63, the 61.8% retracement level of the 127.20-151.89 range, and a sustained break below that level which would pave the way for 127.20 support (2022 low). As long as the 146.58 resistance level is held, bears will remain strong. It is recommended to buy the dips in the short term.

Trading Recommendations

Trading direction: Long

Entry price: 142.50, 141.92

Target price: 146.58

Stop loss: 140.80

Deadline: 2024-01-01 23:55:00

Support: 142.46, 141.54, 140.94

Resistance: 143.89, 144.45, 145.46

Risk Warnings and Disclaimers

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Warren Takunda

Forex

Central Bank

Traders' Opinions

Summary:

Japan's 10-year bond yield falls below 0.70% before the Bank of Japan's (BOJ) decision. BOJ officials are cautious about swift policy changes, emphasizing the need for wage growth evidence. Economic indicators show mixed signals, with manufacturing contracting and services growing. The USD/JPY pair, at 142.20, sees a slight uptick due to a weakened yen and hawkish Fed comments. Analysts predict a potential end to the short-term upward trend, watching the 141.00 level for a possible decline to 140.00. Traders await the BOJ decision for market impact.

BUY USDJPY

Close Time

CLOSED

142.500

Entry Price

144.500

141.800

155.333 +0.567 +0.37%

200.0

Pips

Profit

141.800

144.500

Exit Price

142.500

Entry Price

144.500

The Bank of Japan's (BOJ) monetary policy decision this week, Japan's 10-year government bond yield has eased below the 0.70% mark, signaling investor caution and a tentative market sentiment. This move follows recent discussions by BOJ Governor Kazuo Ueda regarding potential adjustments to interest rates and the pace at which the central bank might unwind its long-standing negative interest rate policy.

While speculation about policy tightening has been rife, Bloomberg reports that BOJ officials are not inclined to swiftly implement such measures unless there is compelling evidence of substantial wage growth capable of sustaining inflation. This cautious stance reflects the delicate balance the BOJ is seeking in managing economic recovery without derailing it.

On the economic front, the latest data reveals a mixed picture for Japan. Manufacturing activity remains in contraction territory in December, indicating ongoing challenges in the sector. However, the services sector has experienced growth, reaching a three-month high. These contrasting signals add complexity to the decision-making process for the BOJ, which must navigate between different facets of the Japanese economy.

Yen Weakening ,USD/JPY Trends Amidst BOJ's Monetary Policy Crossroads_1

The currency market reflects this uncertainty, with the USD/JPY pair currently trading around 142.20. Despite a marginal 0.05% increase today, the prevailing trend is downward. The Japanese Yen has weakened against the US Dollar on Monday, influenced by an overall risk-on sentiment. This trend is further supported by hawkish remarks from Federal Reserve officials, contributing to the strength of the USD.

However, this short-term upward trend in the USD/JPY pair may face headwinds in the near future. The key level to watch is 141.00, as breaking below this point could pave the way for a decline towards 140.00. Traders are advised to remain vigilant as the BOJ's decision unfolds, as it will likely have a significant impact on Japan's financial markets and the broader global economic landscape.

TRADE RECOMMENDATION

BUY USDJPY

ENTRY PRICE : 142.500

STOP LOSS : 141.800

TAKE PROFIT : 144.500

Risk Warnings and Disclaimers

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Ukadike Micheal

Forex

Summary:

The GBP-CAD after hitting a resistance, has broken below the demand point with the sellers in control. A move after a restest of the newly created supply zone would see price head lower.

SELL GBPCAD

EXP

EXPIRED

1.71000

Entry Price

1.61500

1.73980

1.78876 -0.00684 -0.38%

Pips

EXPIRED

1.61500

1.68557

Exit Price

1.71000

Entry Price

1.73980

The Canadian Consumer Price Index (CPI) data is set to be released this week, and it is expected to have a significant impact on the forex market, particularly the GBPCAD pair. The CPI data measures the change in the price of goods and services purchased by consumers, and it is a key indicator of inflation and the overall health of the Canadian economy.

The release of the CPI data is closely watched by forex traders and investors, as it can provide important insights into the future direction of the Canadian dollar and its exchange rate with other currencies, including the British pound. In particular, the CPI data can have a direct impact on the GBPCAD pair, as it can influence the Bank of Canada's monetary policy decisions and interest rate outlook.

If the CPI data comes in higher than expected, it could signal a potential increase in inflationary pressures in Canada, which may prompt the Bank of Canada to consider raising interest rates in order to control inflation. This could lead to a strengthening of the Canadian dollar and a potential decline in the GBPCAD pair.

On the other hand, if the CPI data comes in lower than expected, it could suggest that inflationary pressures in Canada are subdued, which may lead to the Bank of Canada maintaining its current monetary policy stance. This could result in a weakening of the Canadian dollar and a potential increase in the GBPCAD pair.

In addition to the actual CPI data, forex traders will also be paying close attention to the predictive results and forecasts that are released alongside the data. These forecasts are important as they can provide insights into future inflation trends and the potential direction of the Canadian dollar. If the predictive results are significantly different from expectations, it could lead to increased volatility in the forex market and potential trading opportunities for investors.

Overall, the release of the CAD CPI data this week is likely to have a significant impact on the GBPCAD pair and the forex market as a whole. Traders and investors will be closely monitoring the data and its predictive results, as they seek to capitalize on potential trading opportunities and adjust their strategies in response to the latest developments in the Canadian economy.

CAD CPI Data: Possible Impact on GBPCAD Forex Pair and Market Predictions_1

The GBP-CAD is currently experiencing a correction, a move to the marked zone, followed by bearish momentum would see price move lower with first resistance at 1.6800 a break below and sell continuation to 1.61500

TRADE RECOMMENDATION

SELL GBPCAD

ENTRY: 1.7100

STOPLOSS: 1.73985

TARGET: 1.61500

Risk Warnings and Disclaimers

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Is the Pound to Canadian Dollar Set for a Rebound as Key Supports Come into Play?

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Risk Disclosure