Pound continues to slide...

The pound continued its slide against the USD yesterday, despite some hawkish hints being passed around from BoE’s interest rate decision, which maintained a mostly neutral tone in its accompanying statement. The bank maintained rates unchanged at +0.75% as was widely expected, despite two members dissenting and favouring a rate cut. In its statement the bank stated that it’s not obvious how much policy uncertainties have declined since the election and that it sees continued signs that the UK labour market is loosening, yet it remains tight. In a final note the bank mentioned that monetary policy could move to either direction as a response to the economic outlook and should global growth fail or Brexit uncertainties remain entrenched, it may need to reinforce UK’s GDP and inflation. However, the pound found temporarily some support as the bank at some point hinted towards a modest tightening under certain circumstances. It should be noted that the financial releases yesterday didn’t do the pound any favours either as the retail sales growth rate showed a widened contraction. We continue to see the pound being under pressure and should there be further negative headlines about Brexit, we could see it weakening further. Cable continued its drop yesterday testing 1.3015 (S1) support line, despite at some point finding some support from BoE’s interest decision. We maintain our bearish outlook for the pair, as despite the support found from BoE’s interest rate decision, the pair continued to weaken later on. Should the bears actually continue to guide the pair’s direction, we could see it breaking the 1.3015 (S1) support line and aim for the 1.2820 (S2) support level. Should the bulls take over, we could see the pair aiming for the 1.3170 (R1) resistance line and should R1 be broken we could see cable aiming for the 1.3340 (R2) resistance level.

…while the Looney finds support in oil prices…

The CAD weakened somewhat yesterday yet remained near the seven-week high reached in the previous days. The Looney seems to be enjoying some support from the recent rallying of oil prices, as it seems set to continue to strengthen. It should be noted that oil prices got another boost yesterday as in the previous days, a US government agency indicated a contraction of US oil inventories. Also, analysts tend to note that as a commodity currency the CAD tends to be attractive also due to positive prospects for global growth. On the flip side, recent data from Canada where not so positive yesterday as Canadian wholesale trade declined during October by -1.1% mom. We could see volatility rise for the CAD, as Looney traders await the retail sales growth rate for October to draw further conclusions. USD/CAD rose slightly breaking just above the 1.3125 (S1) resistance line (now turned to support). We maintain a bearish outlook for the pair and for it to change we would require the pair’s price action to break the downward trendline incepted since the 3rd of December. Should the pair actually aim southwards, we could see it breaking the 1.3125 (S1) support line and aim for the 1.3025 (S2) support level. On the flip side should the pair find fresh buying orders along its path, we could see it breaking the prementioned downward trendline and aim for the 1.3230 (R1) resistance line.

Other economic highlights today and early tomorrow

Today, during the European session we get Germany’s GfK Consumer Sentiment for January and UK’s final GDP growth rate for Q3. In the American session we get the US final GDP growth rate for Q3, Canada’s retail sales growth rates for October, the US Consumption rate for November, Eurozone’s preliminary consumer confidence for December and the Baker Hughes oil rig count. As for speakers please note that BoE’s Haskel is scheduled to speak today.

USD/CAD 4 Hour