Forex Market: GBP/CAD daily forecast

During yesterday’s trading session GBP/CAD traded within the range of 1.8247-1.8302 and closed at 1.8278.

At 6:57 GMT today GBP/CAD was gaining 0.09% for the day to trade at 1.8286. The pair touched a daily high at 1.8294 at 6:15 GMT.

Fundamental view

United Kingdom

Activity in United Kingdom’s sector of services probably declined in May, with the corresponding PMI coming in at 58.2, down from 58.7 in April, the highest since November 2013.

The index is based on a survey, encompassing managers of companies, that operate in sectors such as transportation, communications, IT, financial intermediation, tourism. They are asked about their estimate regarding current business conditions (new orders, output, employment, demand in the future). Values above the key level of 50.0 signify that activity in the sector has expanded.

Higher than projected readings would certainly heighten the appeal of the pound. The Chartered Institute of Purchasing and Supply (CIPS) is to announce the official reading at 8:30 GMT.

Canada

Canada’s trade balance probably produced a surplus at the amount of 0.100 billion CAD during April, according to the median estimate by experts. In March, nation’s trade surplus was 0.079 billion CAD. Higher than projected surplus would be supportive for the loonie, as Canadian dollar is also known. Statistics Canada will release the official figure at 12:30 GMT.

In addition, the Bank of Canada will probably keep its benchmark interest rate intact at 1.0% for a 29th consecutive time. The Bank of Canada holds its monetary policy in order to set the short-term interest rates. This is accomplished by changing the so-called “overnight” rate. This is the interest rate that major financial institutions pay as interest in the exchange of money between them overnight. Changes in the overnight rate influence other interest rates, such as interest rates on consumer loans, as well as those tied to mortgages. The purpose of the Canadian monetary policy is to maintain the level of inflation as measured by CPI on an annual basis and for this purpose the central bank works closely with the government. Since 1995 the target range is set between 1 and 3 percent. In November 2000, the bank introduced a system of eight fixed dates during the year, to discuss possible changes in interest rates. Decisions are taken by consensus. The Governing Council meeting usually starts on Friday, with the development of general economic analysis and future model of economic development, as well as identifying the trend and inflation. By the end of the day the bank announces its decision on the base rate and holds a press conference on the decision.

At 14:00 GMT, the Bank of Canada will announce its interest rate decision. In case the central bank preserves the main interest rate or in case the bank raises it, this will certainly heighten the loonie’s appeal.

Technical view

According to Binary Tribune’s daily analysis, in case GBP/CAD manages to breach the first resistance level at 1.8304, it will probably continue up to test 1.8331. In case the second key resistance is broken, the pair will probably attempt to advance to 1.8359.

If GBP/CAD manages to breach the first key support at 1.8249, it will probably continue to slide and test 1.8221. With this second key support broken, the movement to the downside will probably continue to 1.8194.