๐ทGBP/CAD Time for a correction?
๐ทGrowth in the UK is clearly slowing down the latest economic growth readings for Q3 2022 showed a 0.2% contraction in the economy
๐ท In Canada, on the other hand, we await for Q3 data which will be released on 29 November the market is also assuming a contraction of the economy from 0.8% to 0.4% here too
๐ท Unemployment in the UK remains low. The latest figures, released on 15 November, put unemployment at 3.6%, up just 0.1% on last reading.
๐ทIn Canada unemployment is 5.2% definitely higher than in the UK, the readings took place on 4 November. Next will be 2 December in which the market is already assuming further increases to levels of 5.4%
๐ทInflation in the UK has beaten extremely pessimistic forecasts and at the readings that took place on 16 November we reached a new peak in inflation which is already 11.1%. This does not create the prospect of slowing down with interest rate rises.
๐ท In Canada, inflation already peaked in July and has been falling steadily since then. We are currently awaiting the latest data which will be released on 21 November. The market is not assuming anything surprising and still regards the continuation of the downward trend as the basic scenario. Slowing inflation creates room for not-so-rapid interest rate rises in Canada.
๐ทUK interest rates at the last council meeting which took place on 3 November were raised to 3%, a jump of a full 75 basis points from 2.25% For the time being, there are no signs of slowing interest rate cuts in the UK.
๐ท In Canada, interest rates are currently at 3.75 per cent and we will find out on 12 December what the next decision of the monetary policy council will be. Evidently, Canada has fared better than the UK in terms of inflation thanks to previous larger increases.
๐ท At the moment Canadian Dollar is more expensive compared to the Pound. But the prospect of further interest rate rises in the UK and a cooling of hawkishness in Canada could bring a strong wave of appreciation of the Pound against the Canadian Dollar over the next few months
๐ท Turning to the chart, we can see that the Pound has gained quite a lot against the Canadian Dollar in the last week without any significant corrections. Looking at the situation as a whole, it seems to me that a correction at this point, especially before further increases, would be advisable.
๐ท๐ทThe best places for a correction for me are two support zones. The first is based on a cluster of fibo levels at 0.236 of the entire upward wave and 0.618 of the current upward wave, which has lasted since 4 November.
๐ทThe second zone is around the 0.786 level of this
wave plus the 1:1 level of the biggest downward correction in the whole upward wave since the determination of the new lows.
๐ทThese are the two places I will be paying attention to.
๐ทOf course, the local resistance zone remains the peak from Friday.
๐ทThe scenario I am playing out is a gradual descent of the price lower and lower taking into account the corrections along the way, then I will look to see what the situation is and to which support level the price will fall. In order to find a future turning point and a continuation of the uptrend
๐ท*Please do not suggest the path I have drawn with the lines this is only a hypothetical scenario for further increases.
๐If you appreciate my work and effort put into this post I encourage you to leave a like and give a follow on my profile.๐
๐ทGrowth in the UK is clearly slowing down the latest economic growth readings for Q3 2022 showed a 0.2% contraction in the economy
๐ท In Canada, on the other hand, we await for Q3 data which will be released on 29 November the market is also assuming a contraction of the economy from 0.8% to 0.4% here too
๐ท Unemployment in the UK remains low. The latest figures, released on 15 November, put unemployment at 3.6%, up just 0.1% on last reading.
๐ทIn Canada unemployment is 5.2% definitely higher than in the UK, the readings took place on 4 November. Next will be 2 December in which the market is already assuming further increases to levels of 5.4%
๐ทInflation in the UK has beaten extremely pessimistic forecasts and at the readings that took place on 16 November we reached a new peak in inflation which is already 11.1%. This does not create the prospect of slowing down with interest rate rises.
๐ท In Canada, inflation already peaked in July and has been falling steadily since then. We are currently awaiting the latest data which will be released on 21 November. The market is not assuming anything surprising and still regards the continuation of the downward trend as the basic scenario. Slowing inflation creates room for not-so-rapid interest rate rises in Canada.
๐ทUK interest rates at the last council meeting which took place on 3 November were raised to 3%, a jump of a full 75 basis points from 2.25% For the time being, there are no signs of slowing interest rate cuts in the UK.
๐ท In Canada, interest rates are currently at 3.75 per cent and we will find out on 12 December what the next decision of the monetary policy council will be. Evidently, Canada has fared better than the UK in terms of inflation thanks to previous larger increases.
๐ท At the moment Canadian Dollar is more expensive compared to the Pound. But the prospect of further interest rate rises in the UK and a cooling of hawkishness in Canada could bring a strong wave of appreciation of the Pound against the Canadian Dollar over the next few months
๐ท Turning to the chart, we can see that the Pound has gained quite a lot against the Canadian Dollar in the last week without any significant corrections. Looking at the situation as a whole, it seems to me that a correction at this point, especially before further increases, would be advisable.
๐ท๐ทThe best places for a correction for me are two support zones. The first is based on a cluster of fibo levels at 0.236 of the entire upward wave and 0.618 of the current upward wave, which has lasted since 4 November.
๐ทThe second zone is around the 0.786 level of this
wave plus the 1:1 level of the biggest downward correction in the whole upward wave since the determination of the new lows.
๐ทThese are the two places I will be paying attention to.
๐ทOf course, the local resistance zone remains the peak from Friday.
๐ทThe scenario I am playing out is a gradual descent of the price lower and lower taking into account the corrections along the way, then I will look to see what the situation is and to which support level the price will fall. In order to find a future turning point and a continuation of the uptrend
๐ท*Please do not suggest the path I have drawn with the lines this is only a hypothetical scenario for further increases.
๐If you appreciate my work and effort put into this post I encourage you to leave a like and give a follow on my profile.๐
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