UK production and trade disappointed. Industrial production for February unexpectedly declined 0.7% while rising 2.8% y/y, down from -0.3% m/m and +3.3%y/y figures in the month prior. The median forecasts had been for 0.2% m/m and 3.8% y/y growth. The narrower manufacturing gauge posted similar disappointments relative to consensus forecasts. The total trade deficit in February blew out to GBP 3.8 bln from GBP 3.0 bln. Prior month data for both production and trade were revised lower, too. Sterling skidded some 30 pips lower to the dollar, and lost ground against the euro and other currencies following the underwhelming data set, which will have economists downward adjusting Q1 GDP calculations. More timely PMI survey data for February portended more weakness to come in the manufacturing sector, and while the service sector strength has offset there is a performance gap emerging between composite UK and Eurozone data.
GBPCAD dove some 50 pips on the UK data miss, which saw both trade and production numbers underwhelm in February data with back-data also revised for the worse. Halifax house price data made it three-out-of-three data release disappointments, too, and the data will fan concerns of a emergent signs of an economic performance gap between the UK and the Eurozone, Britain’s biggest trading partner.
The 4-hour chart in the GBPCAD prompted a SHORT position due to this aggressive spike down in the last session, which broke also the 50 period EMA. Hence, given the current risk off for Canadian dollar as WTI crude prices largely maintain altitude, an entry was taken at 1.6635. Based on a 14 period ATR number, target was set at 1.6590 Target 2 is at 1.6540 which is the confluence of the 150 period EMA. RSI is at 37, sloping downwards while Parabolic SAR turned to negative earlier today. Additionally, in the Daily charts, the Williams’ Percentage range moves sharply below overbought territory, which confirms a downwards momentum, started since end of March. Resistance is at 1.6720-1.6780 area.
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