Two trades to watch: GBP/USD, USD/CAD

Graphic of trading data chart
Fiona Cincotta
By : ,  Market Analyst

GBP/USD rises despite train strikes

GPB/USD is edging higher, holding onto gains from the previous session.

The move higher comes thanks in part to the weaker USD and as the largest train strike in 30 years kicks off. Around 40,000 workers at 13 train operator companies will strike for three days.

The move comes as the cost of living crisis ramps up, and after a YouGov survey showed that Britons were more pessimistic about their finances and inflation than those from 18 other major economies.

The USD is falling lower amid uncertainty over what’s next for Fed monetary policy.

Fed Powell is due to speak later. Any clarity that the Fed is looking to hike rates by a further 75 basis points in July could boost the USD and pull the pair lower.

Where next for GBP/USD?

GBP/USD rebounded from 1.1935 and is pushing higher, rising above the 20 & 50 sam. The RSI is also supportive of further upside. Buyers will look for a move over 1.24, the June 16 high creating a higher high and opening the door to 1.2480, the falling trend line resistance.

Meanwhile, sellers could focus on the downward sloping 100 sma. Failure to break meaningfully over the 50 sma could see sellers test support at 1.2180, the June 17 low on the way to 1.20 round number.

gbpusd chart

USDCAD falls ahead of retail sales, Fed Powell

USDCAD fell yesterday and is extending those losses today as the loonie capitalizes on the weaker USD.

The loonie is tracking oil prices as the price rebounds of tight supply concerns. WTI crude oil heads back up toward $110 per barrel.

Looking ahead, Canadian retail sales are in focus and are expected to rise 0.8% MoM in April after coming in flat at 0% in March.

With inflation at a 30-year high and the BoC hiking interest rates aggressively, investors will be looking for signs that consumer behavior is being affected. Weakness in retail sales could hurt demand for the loonie.

However, retail sales are unlikely to change the course of the BoC; inflation data tomorrow will be the key focus this week for the pair.

In addition to Canadian data, Fed Powell’s monetary policy hearing before Congress will be closely monitored for further clues on what next to expect from the Fed.

Where next for USD/CAD?

USD/CAD rose to a 2022 high of 1.3079 and has rebounded lower, creating a double top reversal pattern. The fall below support at 1.2960, the December 20 high, combined with the receding bullish bias on the MACD, keeps sellers optimistic about further downside.

Sellers will look for a break below support at 1.29, the March high, and 1.2860 to create a lower low, exposing the 50 sma at 1.2790.

Buyers will look for a rise back above 1.2960 to bring 1.3079 back into focus, with a rise above here creating a higher high.

usdcad chart
Related tags: Trade Ideas USD CAD GBP USD