Trading opportunities for currency pair: After the IEA report was published on Friday, Brent oil grew by 1.63%. As the quote per barrel surpasses 57.50 USD, Brent will open will a target of 61.25 USD. As oil recovers further still, the GBP/CAD cross will resume its downward movement.
Last week, the trend line of upwards movement from a minimum of 1.5736 was broken through. After a short correction breaking 1.62, the rate will continue to fall. The first target will be around 1.5944. If Brent prices surpass 60 USD, the GBP/CAD rate will head towards around 1.5944. The third target will be reachable as negative news concerning Brexit hits the airwaves.
The last idea concerning this pair was published on the 12th of December. At the time of publication, the British pound was worth 1.5617 Canadian dollars. An upwards correction from a low of 1.5887 resulted in a W-model. On the 7th of December, this correction broke the trend line. On the 9th of December, the basis for the W-model was complete. As per the downwards trend of the GBP/CAD pair, a fall to 1.6025 was expected. The second target stood at 1.5379.
The rate, in fact, fell to 1.5736. The rate when past the projected 1.6025 and stopped on the lower line of the A-A1 channel, which is located at 100% of the range of the A-A channel.
In every review, I write that the Canadian dollar is strongly tied to oil. Its sale adds a substantial portion of revenue to the state budget. On Friday, the IEA's report caused Brent oil prices to rise by 2.25%, up to 56.84 USD a barrel.
According to the IEA, the output from OPEC countries fell by a million barrels to 32.06m barrels a day. Countries outside the cartel reduced their output by half a million barrels a day. In this regard, the agreement to reduce output has been 90% fulfilled.
The agency is expecting output in the USA, Canada and Brazil to increase by 750,000 barrels a day, and for the cumulative daily production of non-OPEC countries to increase by 400,000 barrels. The report indicated that the IEA has upgraded its forecast for global oil demand by 100,000 to 1.4m barrels a day.
Remember that on the 30th of November, in Vienna, OPEC members agreed to reduce their oil production by 1.2m barrels a day, to 32.5m. On the 10th of December, a meeting was held between OPEC members and other oil-producing countries. This resulted in an agreement between OPEC and 11 other countries to reduce output. The decision was taken to reduce output by 558,000 barrels a day, starting from the 1st of January 2017. The Russian government agreed to facilitate half of this reduction.
On the back of a rise in oil quotes, the GBP/CAD rate fell to 1.6365. Since mid-December last year, oil has been trading sideways above 53.50 USD. After the publication of Friday's report, Brent prices could reach a new maximum for the year. When quotes rise further, the GBP/CAD rate will renew its downward movement.
Last week, the trend line of upwards movement from a low of 1.5736 was broken through. The Canadian dollar strengthened against the pound three times as the trend line was broken. This week, traders must close at around the 1.62 mark. After a short correction and a breakthrough of 1.62, the pair will continue its fall. The first target will be around 1.5944. If Brent rises above 60 USD, then the GBP/CAD rate will move towards 1.5664. The third target will become achievable as negative news about Brexit comes in.