Talking Points:

- USD/CAD Risks Further Losses on Hawkish Bank of Canada (BoC).

- Mixed U.K. Jobless Claims Report to Keep GBP/USD in June Range.

- Q3 Forecasts have just been released and are available in our Trading Guides. And if you’re looking for something more interactive in nature, please check out our DailyFX Live webinars.

DailyFX Table

Ticker

Last

High

Low

Daily Change (pip)

Daily Range (pip)

USD/CAD

1.2883

1.2933

1.2873

1

61

USD/CAD pares the decline from the previous week, with the exchange rate bouncing back from fresh yearly (1.2860), but the Bank of Canada’s (BoC) July 12 interest rate decision may fuel a further shift in market behavior should the central bank continue to alter the outlook for monetary policy.

The 45.3K rise in Canada Employment may encourage the BoC to adopt an improved outlook for the region as ‘the Canadian economy’s adjustment to lower oil prices is largely complete,’ and fresh remarks from Governor Stephen Poloz and Co. may trigger a bullish reaction in loonie should the central bank show a greater willingness to lift the benchmark interest rate off of the record-low.

USD/CAD Daily

USD/CAD Daily Chart

Chart - Created Using Trading View

  • Broader outlook for USD/CAD remains tilted to the downside as the pair breaks the upward trend carried over from 2016, with the next region of interest coming in around 1.2750 (78.6% retracement) to 1.2770 (38.2% expansion).
  • The bearish tilt in the Relative Strength Index (RSI) also highlight the risk for a further decline in dollar-loonie, but the oscillator may point to a near-term exhaustion as the momentum indicator appears to be coming off of oversold territory and approaches trendline resistance.
  • A bullish RSI trigger may spur a near-term correction in USD/CAD, with the first hurdle coming in around 1.2970 (61.8% retracement) to 1.3030 (50% expansion) followed by 1.3130 (50% retracement0 to 1.3150 (78.6% retracement).

Ticker

Last

High

Low

Daily Change (pip)

Daily Range (pip)

GBP/USD

1.2876

1.2908

1.2855

12

53

GBP/USD stands at risk of giving back the rebound from the previous month as the pair marks a failed attempt to test the May-high (1.3048).

The longer-term outlook for the British Pound remains bearish amid the ongoing threat of a ‘hard Brexit,’ and the pound-dollar exchange rate may continue to consolidate over the near-term as mixed data prints coming out of the U.K. economy encourage the Bank of England (BoE) to keep the benchmark interest rate at the record-low. Even though the Jobless Claims report is anticipated to show a 120K expansion in employment, another weaker-than-expected Average Weekly Earnings print may drag on Sterling as it dampens bets for an imminent rate-hike. In turn, BoE Governor Mark Carney and Co. may merely try to buy more time at the next policy meeting on August 3 as the ‘projections that the Committee published in May showed that the economy was expected to operate with a small degree of spare capacity for most of the three-year forecast period, justifying the tolerance of some degree of above-target inflation.

GBP/USD Daily

GBP/USD Daily Chart

Chart - Created Using Trading View

  • Downside targets are on the radar for GBP/USD as the pair initiates a bearish sequence, with the Relative Strength Index (RSI) turning around ahead of overbought territory.
  • Break/close below the 1.2860 (61.8% retracement) hurdle may opening up the next region of interest around 1.2630 (38.2% expansion) to 1.2680 (50% retracement) followed by the 200-Day SMA (1.2551).
IG Sentiment

Track Retail Sentiment with the New Gauge Developed by DailyFX Based on Trader Positioning

  • Retail trader data shows 69.2% of traders are net-long USD/CAD with the ratio of traders long to short at 2.25 to 1. In fact, traders have remained net-long since June 07 when USD/CAD traded near 1.3481; price has moved 4.5% lower since then. The number of traders net-long is 4.1% higher than yesterday and 7.3% lower from last week, while the number of traders net-short is 25.3% higher than yesterday and 22.2% higher from last week.
  • Retail trader data shows 43.8% of traders are net-long GBP/USD with the ratio of traders short to long at 1.28 to 1. In fact, traders have remained net-short since June 23 when GBP/USD traded near 1.2673; price has moved 1.7% higher since then. The number of traders net-long is 6.6% higher than yesterday and 21.1% higher from last week, while the number of traders net-short is 7.1% higher than yesterday and 14.1% lower from last week.
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--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

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