GBP/CAD has been on a tear this month, up around 700 pips, but is now reaching key resistance ahead of some major event risk for both the Pound and the Canadian Dollar. GBP/CAD has been trading in a range since 2010, when the pair hit its low at 1.4832, before rallying to the top of the range at 1.6473. Since then, GBP/CAD has traded between that 1.6470 figure and about 1.5240, a nice 1200 pip range that has held, consistently, since August of 2010.
That range is in jeopardy now, however, after a series of better than expected data releases out of the UK has driven GBP/CAD right to the very top of the range. The pair actually hit its highest level since February of 2010 earlier this month, briefly breaking above the range before falling back late last week. To further add to the significance of the range, the 50 month EMA (in red) is also sitting right at the top of the range; the pair hasn’t traded above the 50 month EMA since 2007.
This week we have significant data out of both the UK and Canada that could either help reinforce the long-standing range, or finally provide a breakout. On Wednesday we have a speech by BoE Governor Mark Carney, which will be carefully watched to see if the BoE is preparing to normalize monetary policy sooner than anticipated after the series of stronger than expected data releases. The Pound could experience some significant volatility during this speech. On Friday we have the Canadian monthly GDP release, and after in line growth last month, economists are expecting the Canadian economy to contract by 0.3%. Should we see strong growth out of Canada, GBP/CAD will likely fall, reinforcing the longstanding range. GBP/CAD can be a challenging pair to trade, but the significant technical confluence at the current levels offers great opportunities for both bulls and bears.
Written by: Liam McMahon, Currency Strategist – GlobalFxClub.com