The Canadian dollar bounced back against the greenback after the pair failed to break above the 50-Day SMA at 1.0980 during the previous day, while the GBP/USD tumbled lower following the weakened outlook held by the Bank of England.
The Canadian dollar bounced back against the greenback after the pair failed to break above the 50-Day SMA at 1.0980 during the previous day, and we may see the USD/CAD continue to retrace yesterday’s advance throughout the U.S. trade as the outlook for the world’s eighth largest economy improves. At the same time, the dollar-loonie failed to cross back above the 20-Day moving average (1.0875) during the overnight session and has moved nearly 60% of its daily ATR despite the spike lower following the slew of economic data at 14:30 GMT, and the pair may continue to trend lower to test for intraday support. However, as the 30-minute RSI approaches oversold territory, we may see the pair bounce back and hold a narrow range throughout the trade but, a break below yesterday’s range may lead the pair to test the weekly low at 1.0716.
The GBP/USD rose to a high of 1.6662 following the enhanced reading for inflation however, the dovish outlook held by Bank of England Governor Mervyn King led the British pound to tumble lower during the last three-hours of trade, and we may see the pair hold above the 20-Day SMA (1.6414) as the daily price action exceeds the average true range. However, as the U.S. dollar continues to strengthen against most of its currency counterparts, the rise in risk aversion may lead the pair to weaken further, and a break below the 20-Day is likely to expose the previous week’s low at 1.6322. The weakened outlook held by the central bank may lead investors to scale back long-term expectations for higher interest rates, and we may see the pound-dollar hold a broad range throughout the week as investors weigh the outlook for future policy.
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To discuss this report contact David Song, Currency Analyst: dsong@fxcm.com
