The pound continued its slide against the greenback and the common currency yesterday, albeit some signs of stabilization seem to emerge. It’s indicative of the pound’s weakness, that cable continued to fall even though the Fed proceeded with another surprise rate cut on Sunday. ,b>Uncertainty surrounding the pound may be increased as Johnson’s government decided to follow a different path regarding the coronavirus outbreak. Specifically, Johnsons’ government had announced that it would pursue a strategy of a “herd immunity” which means though, that even more people have to be infected in order for the strategy to work intensifying the health risks along with the economic risks for the UK. Also, the uncertainty regarding the future relationship of the UK with the EU is still hanging over the UK economy intensifying uncertainty even further. Despite the market not pricing in another possible rate cut by the BoE, analysts tend to note that the bank may be forced to provide further monetary stimulus. We could see the pound remaining under pressure, yet traders could be turning their eyes towards the release of UK’s employment data for January, today. Cable continued its journey south yesterday, clearly breaking the 1.2310 (R1) support line, now turned to resistance. We maintain the bearish outlook for the pair as long as it remains below the downward trendline incepted since the 11th of March. Please note that technically the pair seems to find considerable support at the 1.2200 (S1) support line hence the strength of the prementioned downward trendline could be put to the test. Should the bears maintain their control over the pair, we could see it breaking the 1.2200 (S1) support line and aim if not break the 1.2110 (S2) support level. Should the bulls take over, we could see cable breaking the downward trendline, the 1.2310 (R1) resistance line and aim for the 1.2400 (R2) resistance level.
Also, the CAD weakens on uncertainty
The CAD weakened against a number of its counterparts yesterday as the uncertainty continues to rise for the Looney. The persistently weak oil prices continue to darken Canada’s economic outlook, as the commodity is one of the main products of the country. At the same time BoC’s surprise rate cut of 50 basis points on Friday also weakened interest rate differentials surrounding the CAD, while the bank yesterday released additional measures to support key funding markets. It should be noted, that Canada’s main stock market index tumbled nearly 10% according to Reuters, due to the uncertainty. We maintain a bearish outlook for the Loonie as further pressure could be expected and uncertainty persists. USD/CAD continued to rise yesterday breaking the 1.3970 (S1) resistance line, now turned to support. We maintain a bullish outlook for the pair as it maintains a course above the upward trendline incepted since the 9th of the month. Should the pair’s long positions continue to be favored by the market, we could see it breaking the 1.4050 (R1) resistance line, aiming for higher grounds. Should the pair come under the selling interest of the market, we could see it breaking the 1.3970 (S1) line and aim for the 1.3865 (S2) support level.
Other economic highlights today and early tomorrow
Today during the European session, UK’s employment data for January are to be released as are the ZEW indicators for March from Germany and New Zealand’s milk auction figures. In the American session, we get the US retail sales growth rate for February, Canada’s manufacturing sales growth rate for January and the US industrial production growth rate for February. Just before the Asian session starts, we get from the US the API weekly crude oil inventories figure, as well as New Zealand’s current account balance for Q4. During the Asian session, we get Japan’s trade data for February. Also please note that ECB’s Luis de Guindos will be participating in the ECOFIN meeting later today, while RBA’s Ellis is scheduled to speak, early in the Asian session tomorrow.
GBP/USD 4 Hour chart
Support: 1.2200 (S1), 1.2110 (S2), 1.2015 (S3)
Resistance: 1.2310 (R1), 1.2400 (R2), 1.2510 (R3)
USD/CAD 4 Hour chart
Support: 1.3970 (S1), 1.3865 (S2), 1.3760 (S3)
Resistance: 1.4050 (R1), 1.4175 (R2), 1.4290 (R3)
