GBPUSD Upward Trending Equidistant Channel: 2-hour chart

It was widely anticipated that the Bank of England would be the first Central Bank of the major 7 currencies to raise interest rates amidst the ongoing global currency war. The robust expansion in the U.K. economy and soaring property market made higher interest rates a real possibility until the latest fight with deflation encountered by the European Central Bank. The prospect of importing deflation is preventing BoE Governor Mark Carney and the Monetary Policy Committee from taking interest rates higher. U.S Federal Reserve Chairman Janet Yellen echoed similar sentiment during her testimony before Congress whilst pushing back her own rate hike timeline.  BoE policymakers are expected to leave interest rates on hold this week at 0.50% as they await more data confirming a broader economic expansion.  Manufacturing, construction, and services PMI data due this week could be the spark that GBP momentum to the upside.  Speeches from both Central Bankers this week should further highlight the inflation and employment outlooks for their respective economies.

Since peaking in July, GBPUSD has steadily trended lower as investors were more confident in the American recovery and the prospect of the Federal Reserve concluding with quantitative easing as a precursor to higher interest rates. After bottoming in January, prices have managed to retrace some of the downside, rising over 600 pips from lows before pulling back modestly. The extended timeline offered by Janet Yellen for raising interest rates will certain sap some recent dollar strength as investors prepare for the unemployment number at the end of the week. In the meantime, GBPUSD continues to strengthen, trending within an upward trending equidistant channel over the last three weeks. The main strategy is to follow the trend higher, focusing on initiating long positions at the lower channel line and closing positions at the top of the channel. Short positions in an upward trending channel are not suggested due to the worsening reward characteristics and higher risks.

USDCAD Descending Triangle Pattern: 4-Hour Chart

The rapid appreciation of the U.S. dollar since summer of 2014 has only recently seen momentum higher slow as traders await a more concrete interest rate outlook. USDCAD presently sits not far from multi-year highs after touching levels in January not seen since 2009. However, the parabolic move higher is currently in consolidation, with a tightening range in a descending triangle pattern. Although the latest move by the Bank of Canada to surprisingly drop interest rates by 25 basis points helped the pair hit the latest peak, another imminent cut in this week’s interest rate decision is not likely. However, GDP data this week from Canada will likely give more clues to the outlook as any miss to expectations could see another 0.25% cut to interest rates in the future, weakening the Canadian dollar further. By the same token, any American data that broadly misses expectations this week like nonfarm payrolls or manufacturing data could send the U.S. dollar tumbling against peers. 

Risks to the outlook for both the U.S. and Canada are mounting and lower energy prices are hitting the Canadian economy harder. The current descending triangle technical setup might see further downside in the pair before the uptrend resumes higher. Playing the range in the consolidation is not suggested because of the worsening reward conditions over time. The key level to watch on the downside is support at 1.2371 as any break below could see a breakout trade emerge with as much as 375-475 pips of downside in the trade. The support line presents an excellent place to enter or possibly exit the trade if the move is false or intended to shakeout other traders.

USDCHF Ascending Triangle Pattern: 2-Hour Chart

The shocking move of the Swiss National Bank to drop the longstanding currency peg to the Euro had dramatic reverberations across markets, with USDCHF losing over a quarter of its value before rebounding in the subsequent weeks. At this point, the Swiss are sticking with a softer peg to the Euro, targeting a range of 1.0500 to 1.1000 in EURCHF to keep the Swiss economy expanding while not breaking the bank by intervening constantly to maintain the currency’s competitiveness. Swiss GDP due on Tuesday is expected to show slowing expansion in the insulated economy as a stronger Franc impacts local multinational corporations. GDP is expected to grow at a slower 1.70% annualized versus the 1.90% recorded in the prior reporting period. Although the SNB has vigorously tried to keep the Franc from appreciating too quickly, the strength will likely pressure growth to the downside in the near-term. 

Positive interest rates in the United States coupled with a stronger growth and labor outlook make the upside-bias in USDCHF stronger in the short-term despite the Swiss Franc remaining a safe haven asset. The Central Banks efforts with negative deposit rates have so far threatened any large speculative inflows that could push the Franc higher in the near-term. However, a worsening global outlook could see the safety-bid shift from the Dollar to Franc. The ascending triangle appearing in USDCHF is a bullish technical pattern, with the key level being resistance at 0.9550. Any move above this level should be treated as a breakout trade with upside potential of 360-400 pips while a major dip below the prevailing multi-week uptrend line should be viewed as a breakdown in the technical pattern.