GBP/CAD traded higher during the European morning Friday

GBP/CAD

• The dollar traded unchanged or higher against almost all of its G10 peers during the European morning Friday, in the absence of any major market moving event. It was higher against SEK, AUD, CAD and EUR, in that order, while it was lower only against GBP. The greenback was virtually unchanged against CHF, JPY, NZD and NOK.

• The Canadian dollar remained under selling pressure following the BoC rate cut on Wednesday and the decline in oil prices in the recent weeks. Today, we get the country's CPI rate for June and the expectations are for the headline rate to rise a bit, while the core rate is forecast to remain unchanged in pace. Given the fact that the BoC adopted an easing bias and left the door open for further rate cuts, I believe that CAD could weaken further in the following weeks.

• Later in the day we also get the US CPI for June. Market consensus is for a rise in prices after an unchanged reading in May and along with the strong appetite for USD, we could see USD/CAD trading above 1.3000 soon.

• The BoC's easing stance contrasts with the Bank of England's. BoE Gov. Carney said yesterday that he expected to start raising rates within the next three years, and that the timing for the start of this normalization process "will likely come into sharper relief around the turn of this year."

• GBP/CAD traded higher during the European morning Friday, breaking above the resistance (now turned into support) barrier of 2.0250 (S1). Since on the 4-hour chart, the price structure suggest an uptrend, I would expect the rate to continue higher in the short run and to challenge the psychological resistance line of 2.0500 (R1). A break above that key level is likely to extend the bullish wave and perhaps aim for the next resistance at 2.0680 (R2). Nevertheless, taking a look at our short-term momentum studies, I see the possibility of a pullback before buyers decide to take the reins again. The RSI stands within its overbought territory and has turned down, while the MACD shows signs of topping and could fall below its trigger line soon. On the daily chart and weekly charts, the major trend is positive as well. What is more, our daily oscillators detect strong upside speed and support the case that the trend is likely to continue. The 14-day RSI stands within its above-70 zone and points up, while the daily MACD lies well above both its zero and trigger lines, pointing north as well.

• Support: 2.0250 (S1), 2.0120 (S2), 2.0000 (S3)

• Resistance: 2.0500 (R1), 2.0680 (R2), 2.0860 (R3)