The BoE left inflation forecasts near unchanged and maintained that the next policy move would likely be a tightening. It also emphasized that economic and financial indicators are likely to be less informative than usual due to Brexit uncertainties. It seems that both sterling markets and the BoE are in a wait-and-see mode. Much will depend on the evoluation of polling outcomes as the Jun-23 referendum draws nearer. The FT Brexit poll tracker currently has 46% for “Remain” and 43% for “Leave,” while Ladbroke betting odds show 71% for the UK to remain in the EU.
The press conference was even more interesting than usual with the normally unflappable Mr Carney seemingly somewhat stressed by the constant referrals to Brexit. He was pushed by the BBC correspondent and he finally (some in the leave camp say it was planned) uttered the “R” word. Recession. In his defence the BoE have two mandates that of fiscal prudence and secondly of transparency. If the UK did tip in to negative growth (and even recession) in the second half of 2016 and he had not expressed the BOE’s view prior to the Referendum, then he (they) would have been accused of poor judgement.
This glut of data surrounding sterling yesterday and the inevitable noise that comes with it lead me to take a closer look at the GBP pairs on yesterdays close. GBPCAD was the pair on the daily chart that looked most interesting:
The Canadian oil sands fires have not damaged production as much as initially thought and the facilities will be back sooner than anticipated, the rally in the oil price keeps grinding higher, for now.
- Break of the upper Bollinger band not sustained,
- Long tail on Tuesdays candle and break of the 50 DMA at close on Wednesday from overbought levels
- Thursday close below the 50 DMA and no direction from associated with volatile Oil price, triggered an entry 1.8562
- Daily Oil chart remains bullish positive for CAD
- Higher time frame Monthly chart remains bearish
- Target 1 – (Daily ATR) – 1.8420 also coincides with 20 DMA.
- Target 2 – (Recent low and close to lower Bollinger band) – 1.81300
The recent down trend appears to be weakening so probability of Target 2 lower than normal.
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Chief Market Analyst
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About Janne Muta, HotForex’s Chief Market Analyst
Janne Muta is a seasoned industry professional with over 16 years experience in the global markets. Originally from Finland, Janne has worked for institutions in both Helsinki and London as an institutional fund manager, global market analyst and FX educator.
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