GBP surges on GDP, CAD on Core CPI
UK GDP grew 0.7% qoq, 2.8% yoy in Q3, slightly better than expectation of 0.6% qoq, 2.7% yoy growth. This is reinforcing expectation of another 25bps hike from BoE in November to raise rates to 5%. GBP/USD extends this week’s rally to as high as 1.8854, setting to end the week with strength.
Canadian core CPI came in stronger than expected increasing 0.5% mom 1.7% yoy in Sept versus expectation of -0.3% mom, +1.0% yoy. Headline CPI dropped 0.5% mom dragging yoy growth to 0.7% primarily due to fall in energy prices. The solid core CPI is suggesting that BoC will need to remain firm to keep rate unchanged at 4.25% for some time. CAD is also supported by M&A flows. USD/CAD drops sharply to as low as 1.1213, pressing last week’s low of 1.1211.
Daily Pivots: (S1) 1.8697; (P) 1.8747; (R1) 1.8829;
Cable’s rally continues today, reaching as high as 1.8854 so far. At this point, intraday bias remains on the upside as long as cable stays above 1.8799 minor support. Further rally is expected to follow towards 1.8898 cluster resistance (61.8% retracement of 1.9142 to 1.8517 at 1.8903. Below 1.8799 will turn outlook consolidative first and risk pull back towards 1.8739 resistance turned support.
As discussed before, sustained trading above 1.8702 resistance (50% retracement of 1.8898 to 1.8517 at 1.8708) indicates whole fall from 1.9072 has completed after meeting 1.8538 cluster support. Firm break above 1.8898 cluster resistance will encourage further rally towards upper end of recently established range at 1.9090. On the downside, it will take a break below 1.8662 support to shift focus back to the downside to 1.8517/38 support zone.
In the bigger picture, an important medium term top should be formed at 1.9142 already but it’s unclear which path the subsequent consolidation will take. Nevertheless, as long as cable stays above 1.8538 clusters support, we’ll assume it’s in sideway consolidation. On the upside firm break above 1.9199 resistance (61.8% projection of 1.7230 to 1.9024 from 1.8090) is needed to confirm medium term rally has resumed. Otherwise, choppy consolidation is still in progress and risk of another fall remains.
Shing-Ip Tsui is the founder and CEO of
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