Given the inter-linkages between the US and Canadian economies, it is likely that a strong durable goods order figure today (24 Apr) out of the former will help the Canadian dollar continue its turnaround. We suggest trading the loonie against the British pound.

Forecasts for US durable goods order growth in April are for a very conservative 0.2% advance, and a better-than-expected number here could be an early signal that the world’s largest economy is pulling clear of its first-quarter poor weather related disappointments.

As risk appetite bounces back, so too are commodity prices, creating a double whammy for the Canadian economy, given it is a major commodity exporter. While all the talk is of the Bank of England raising UK base rates, we don’t expect borrowing costs to increase as fast as the market expects, further supporting this trade.

Key levels:The GBP/CAD bull-run looks to have run out of steam with a possible top being posted at 1.8647 (20 Mar), a level which the pair has failed to rally through on two occasions, which could see a three-wave correction begin to unfold. This suggests downside up to 1.7469 (161.8%). The pair is currently trading at the 23.6% level of 1.8468, but traders may wish to remain out of the market until a close level below the 38.2% (1.8468), confirming a bearish bias.