The loonie was recently predicted to reach parity vs. the greenback, but after a steep correction to the downtrend, USDCAD is hesitating above 1.0400 and seems disinclined to head lower. With Crude Oil at $80, one might have anticipated on greater strength from CAD which is looking rather directionless in the short-term. Today's Leading Index and Wholesale Sales data may give some direction for the remainder of the week. We are focused on the converging trend-lines displayed on the chart, indicating that a breakout is approaching.
EURUSD has been positively correlated to equity markets of late, but unlike the equities EURUSD has failed to make new highs and struggles to hold above 1.5000. Indeed, a look back over the past six weeks reveals that a range has developed between 1.4700 and 1.5000 which illustrates the market's lack of conviction. We anticipate further churning in the range for now. As for EURGBP: it has been steadily downtrending for the past month, but we note that it has bounced off support at 0.8840 and formed a bullish engulfing reversal pattern; we would venture a short-term trade targeting 0.9050.
As predicted in yesterday's review, GBPUSD took a dive after it was revealed that there was no consensus on QE at the last MPC meeting. The question is: has the split in the BoE disabused the market of its bullish conviction for cable? In technical terms, the answer must be negative: a glance at the chart shows GBPUSD holding above its rally trend-line, even if only slightly. While the discussion by the MPC about lowering the rate on banks excess reserves is dovish for sterling, and admittedly further QE cannot be ruled out, we note that the upwardly revised inflation forecast (2.7% y/y for Q1 2010) balances the picture. For the time being, the bulls remain in charge of GBPUSD.
EURUSD Support/Resistance: 1.4820/1.4990
EURGBP Support/Resistance: 0.8840/0.8970
USDCAD Support/Resistance: 1.0450/1.0605
GBPUSD Support/Resistance: 1.6670/1.6750