Hawkish Fed Rhetoric to Fuel USD/CAD Recovery; August-High on Tap?

Talking Points:

GBP/USD Snaps Bearish Sequence, Fails to Test 100-Day SMA (1.3017).

Hawkish Fed Rhetoric to Fuel USD/CAD Recovery; August-High on Tap?

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GBP/USD has staged a suggestive improvement off of 2017-high (1.3657), with a broader opinion dark by a Brexit negotiations, yet a span might recover a balance forward of a subsequent Bank of England (BoE) seductiveness rate preference on Nov 2 as a executive bank shows a incomparable eagerness to pierce divided from a easing cycle.

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Market participants might compensate increasing courtesy to Governor Mark Carney and Co. as a flourishing array of Monetary Policy Committee (MPC) officials adopt a hawkish tone, and signs of stronger-than-expected enlargement might inspire a BoE to change a financial process opinion as house member Ian McCafferty argues ‘the small tardy that now stays is expected to disappear utterly quickly, while acceleration is projected to steadfastly mistake a target.’ In turn, a infancy of a MPC might opinion in preference to mislay a record-low seductiveness as a ‘withdrawal of partial of a impulse that a Committee had injected in Aug final year would assistance to assuage a acceleration mistake while withdrawal monetary process really supportive.

Keep in mind, a BoE might continue to tame a longer-term opinion for a benchmark seductiveness rate generally as Prime Minister Theresa May faces a flourishing risk of losing a U.K. leadership, yet a broader change in GBP/USD might continue to take figure over a residue of a year as a span extends a ceiling trend from progressing this year.

GBP/USD Daily Chart

GBP/USD Daily Chart

  • GBP/USD might continue to retrace a decrease from progressing this month as it snaps a array of reduce highs lows from a prior week and fails to exam a 100-Day SMA (1.3017).
  • Break/close above a 1.3210 (50% retracement) jump opens adult a subsequent segment of seductiveness around 1.3300 (100% expansion) to 1.3320 (38.2% retracement).
  • Keeping a tighten eye on a Relative Strength Index (RSI) as a oscillator preserves a bearish arrangement carried over from September, yet a movement indicator appears to be highlighting a identical energetic as cost as it appears to be branch around forward of oversold territory.


USD/CAD might continue to retrace a decrease from a summer months as it extends a bullish arrangement carried over from September, while a Federal Open Market Committee (FOMC) appears to be on march to broach 3 rate-hikes in 2017.

The slew of uninformed tongue entrance out of a Federal Reserve might continue to worsen a interest of a U.S. dollar as Fed Fund Futures now prominence a incomparable than 80% luck for a Dec rate-hike, and executive bank officials might ready households and businesses for aloft borrowing-costs as a U.S. Non-Farm Payrolls (NFP) report boosts a opinion for enlargement and inflation. In contrast, comments from Bank of Canada (BoC) Deputy Governor Carolyn Wilkins might drag on a internal banking as a executive bank start to alleviate a hawkish tone, and Governor Stephen Poloz and Co. might mostly validate a wait-and-see proceed over a residue of a year as ‘there stays some additional ability in Canada’s work market, and salary and cost pressures are still some-more resigned than chronological relations would suggest.’

USD/CAD Daily Chart

USD/CAD Daily Chart

Chart – Created Using Trading View

  • Even yet USD/CAD fails to extend a array of aloft highs lows from a prior week, topside targets sojourn on a radar as prolonged as a span binds above a 1.2510 (78.6% retracement) hurdle.
  • Break/close above a 1.2620 (50% retracement) segment raises a risk for a run during a Fibonacci overlie around 1.2770 (38.2% expansion) to 1.2830 (38.2% retracement), that mostly lines adult with a August-high (1.2778).
  • Watching a Relative Strength Index (RSI) as it approaches overbought territory, with a mangle above 70 lifting a risk for a incomparable allege in a sell rate as a bullish movement gathers pace.

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— Written by David Song, Currency Analyst

To hit David, e-mail dsong@dailyfx.com. Follow me on Twitter during @DavidJSong.

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