Nafta to be sorted before Brexit
The GBP/CAD pair looks very interesting right now from a technical and fundamental perspective. Price has tested the 200MA and been firmly rejected as two opposing trade deal narratives come into focus; Brexit and Nafta.
For the GBP the number one concern for traders is not the day to day economics data, rather the question on how the Brexit negotiations will go and the nature of Britain's relationship with it's withdrawal from the EU.
For Canada, the result of NAFTA is the number one concern of traders.
With both NAFTA and Brexit there is a daily flurry of news reports. Spanning over the daily time frame this now seems a good time to place a position on NAFTA getting done before Brexit with near term risk easy to define.
Theresa May is going into the Conservative party conference and the ex-Foreign Secretary, Boris Johnson, has been announcing his '6-point' plan for a Brexit alternative. Now, I haven't seen any details on this yet, but any attention or attraction to BOJO's plan will likely be pound bearish. And if there is one thing that Boris can generate it is this: attention. He is a very charismatic leader who plays a bumbling eccentric with foppish hair to his full advantage. In terms of popularity Boris is doing well.
However, my question is whether he is really considered to be responsible enough to handle Britains future trade relationship with a huge EU market next door. I'm not sure. Theresa May reminds me of the girl who always does her homework, is nice to be around, conscientious, hard working and drills into the detail. She shared that the naughtiest thing she did as a child was to 'run through fields of wheat' and the 'local farmers were none too pleased with that'. Needless to say a safe pair of hands. Now, I don't know what BOJO would share as the naughtiest thing he did as a child, but it wouldn't be running through fields of wheat for sure ;-)
Nafta has a 90% chance of a deal being done and it just seems a matter of time now. Check out Adam's comments to Bloomberg on Canada and Nafta here.
Ok, so looking at GBPCAD I favour a NAFTA deal to be sorted before a Brexit deal. GBPCAD technically has a bearish divergence, marked on the chart with 200MA providing near term risk. Play to the recent daily lows as an obvious target. Today is not the best day to enter the trade due to NAFTA comments likely out later about the US and Mexico, so a real value entry would be selling off the 200MA at a return to that today.
