Today the GBP/USD finally broke the 1.30 handle today following the release of strong UK economic data throughout the week. Whether or not the cable will now be able to climb further heights remains to be seen as the upcoming UK election in June may keep investors on the edge. But the breakout is significant at least from a technical perspective and as a result speculators will be looking across the GBP pairs to find trading opportunities.
The GBP/CAD may be a candidate, for there is important data coming up from Canada tomorrow, including CPI and retail sales. With CPI expected to rise a further 0.5% month-over-month after a 0.2% rise the month before, I do think that there is scope for disappointment. A weaker CPI print than 0.5% could lift the GBP/CAD sharply higher, especially if the cable also manages to hold its own above 1.30. Conversely, a stronger CPI print for Canada could boost the CAD, especially against weaker currencies.
Technically, the GBP/CAD is looking bullish as it has already broken its own important resistance at 1.7530ish and is so far holding above it. Today’s GBP strength has seen the GBP/CAD break through its short-term corrective trend line, thus paving the way for the bullish trend to resume if we can close above the line. If so, the path of least resistance would remain to the upside. As a result, we may see an eventual rally towards the long-term support and resistance area of around 1.8030-1.8150 in the coming days.
Alternatively, if the GBP/USD’s break above 1.30 turns out to be a false one, then the GBP/CAD could also head lower, especially if it breaks that long-term support at 1.7530.
But at the moment, we are expecting further range expansion to the upside until the chart tells us otherwise. A weak set of Canadian data tomorrow could help accelerate the rally.
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