The monthly chart is looking decidedly bearish with three-down months in a row, indicating the probable establishment of a down-trend.
The 1.8505 lows correspond with the target for the double top price pattern which formed at the highs and then broke down; it is the 100% extrapolation of the pattern down.
Despite having met its target, the medium term down-trend will probably continue, with further confirmation coming from a break below the 1.8505 lows, signalled by a move below 1.8480, which would see a probable extension down to the next major support level at the S1 Monthly Pivot at 1.8285.
Brexit remains main risk to sterling
According to Charles Purdy of Smart Currency Exchange Brexit remains a constant danger to sterling:
“With concerns around the “Brexit” lingering on, sterling is still lacking the ability to gain meaningful ground against the euro. The downside risk for sterling certainly seems to exceed by a significant margin its upside potential.”
CAD – Federal Budget is Highlight of Calendar
The main highlight of the coming week for the Canadian Dollar is the Federal Budget by the newly elected liberal government on Tuesday March 22.
The budget is expected to contain a strong pro-growth element which is expected to support the Canadian Dollar as it will take the pressure of the Bank of Canada (BOC) to use monetary policy easing.
That is, if the government’s budget contains plans to increase investment spending in infrastructure and the like, this will stimulate the economy and make it less likely the BOC will have to ease policy or cut interest rates further to encourage monetary stimulus.
This in turn will protect CAD from central bank induced depreciation.
According to Brokerage House TD Securities:
“The upcoming federal budget is expected to reveal a $30B deficit for 2016/17, of which $18B reflects a shortfall in revenue due to a weaker economic outlook (including a $6B contingency). The balance will be filled with platform commitments, including tax breaks and infrastructure spending; our projections have fiscal stimulus adding 0.1% to GDP growth in 2016 and 0.3% in 2017. The deficit will likely be funded by an increase in bond issuance from $92B to $120B.”
Reuters further underline the point about the budget:
“Prime Minister Justin Trudeau said last week he was committed to fast-tracking infrastructure investments in the oil- and gas-rich province of Alberta, which is suffering from the global slump in energy prices.”
“The budget, which the Liberals have pledged will include major new spending aimed at boosting a flagging economy,”
Retail Sales up in January
Recent Retail Sales figures for Canada also surprised to the upside, comments Western Union’s Joe Manimbo:
“Canadians went on a surprise spending spree in January when retail sales soared some 2.1%, a good sign for first quarter growth. Headline inflation cooled to a 1.4% annual rate in February, down from a 2% pace in January.”
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