It's been a day of uncertainty in the UK, as the pound has taken a hammering against all major pairs in the wake of fresh problems and issues. UK inflation data out this morning was weaker than expected coming in at 0.3% y/y (0.4% y/y exp) causing further worries that it may take some time to see a rate hike in the UK economy. While at the same time the political topic of the Brexit continues to weigh heavily on the currency and many are now viewing this as a major catalyst for volatility in the pound, and with a divided country it certainly looks like it will be a rocky road. Recent political and business manoeuvrings have really thrown the issue up in the air, and with no way for the market to measure the impact many are wondering what effects an exit would have on the UK economy, and if a lot of the trade deals can be salvaged as a result.
Chart wise the volatility is not a bad thing as it presents a golden opportunity for traders and many will now be looking to capitalize of the bearish nature of the market at present. Support can be found at 1.4054 and I would expect the market to look to target this key level, with the next level down at 1.3916 being a bit of stretch for the market at present I feel. What will also be a key is the possible bullish trend line that could be in play of the large wick from the previous touch of this support level, if we see a second bounce here we could see them market look to run a bit higher and push resistance at 1.4395.
The Canadian dollar continues to also be fighting the trend as of late as oil prices continue to buck the trend and climb higher on the charts. Despite all of this there is still a lot of uncertainty about if oil can really climb much higher on the charts, but there has been talk of Iraq now freezing oil supply at current levels to bolster prices, however with Libya walking away from the table this seems a tad unlikely. The Canadian economy has also been bolstered by the recent consumer data last week which saw retail sales jump m/m jump to 1.2% (0.4% exp) a large jump compared the previous months negative reading of -1.6%.
When it comes to trading the USDCAD though the key here is the strong bearish channel that is been in play for some time. Currently the market is trending upwards and it looks more than likely that it will look to make a strong touch on the top bearish trend line and combined with the 20 day moving average we could see a strong pullback here. If there is a push back from here the market will aim for support at 1.2899 and it's likely we could see further drops if the Canadian economy looks to improve further.
Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.