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Central banks are ready to tighten their polices

October 26, 2021

GBP/USD: The pound edged higher on Monday as British currency benefited from expectations that the Bank of England will raise rates. Money markets are pricing in a rate hike by the central bank at its meeting on Nov. 4. However, data from the UK last week was mixed: PMIs rose as the economy unexpectedly regained momentum in October, but retail sales figures were worse than expected, sending the pound lower at the end of the week. Strong macroeconomic statistics, coupled with the latest comments from the head of the Bank of England regarding the tightening of monetary policy, create excellent conditions for further growth of the British currency against the dollar. Immediate resistance can be seen at 1.3780. A breakout up can trigger growth towards 1.3850.

BUY STOP 1.3780/TP 1.3850/SL 1.3760


USD/JPY: The dollar strengthened against the yen on Monday as traders looked ahead to tighter U.S. monetary policy even as they bet on the prospect of interest rate hikes happening earlier outside of the United States. Currency markets were broadly quiet at the start of the week with traders awaiting U.S. growth data and central bank meetings in the eurozone, Japan, and Canada. Strong resistance can be seen at 114.00. A breakout to the upside can trigger growth towards 114.50.

BUY STOP 114.00/TP 114.50/SL 113.80


USD/CAD: The Canadian dollar weakened against the U.S. dollar on Monday, as oil gave back its earlier gains and investors weighed the potential for the Bank of Canada to push back against recent moves by the market to price in multiple rate hikes next year. The central bank is due to make an interest rate announcement on Wednesday. It is expected to raise its inflation forecast and to largely end stimulus from its pandemic bond-buying program. Last Thursday, the currency touched its strongest level in nearly four months at 1.2287. In case of further growth in oil prices, as well as more hints on policy tightening from the Bank of Canada, the USD/CAD pair will continue to decline. Immediate support is seen at 1.2350. A breakout below could take the pair towards 1.2300.

SELL STOP 1.2350/TP 1.23/SL 1.2370