Technical Sentiment: Neutral
Key Takeaways
- GBP/CAD found plenty of buyers near the 1.8160 support ;
- Thursday’s Bullish Pin Bar was activated;
- The pair will assume a range personality next week unless the rally ends around 1.8420.
The 0.4% increase in Canadian Manufacturing Sales, compared to 0.2% forecast, was not enough to keep traders from buying GBP/CAD once it approached the critical support level at 1.8160. The ensuing rally erased Thursday’s gains, closing the Daily bar as a bullish Pin bar, dodging a reversal of the long term uptrend and ultimately indicating the main range will persist for now.
Technical Analysis
GBP/CAD is currently trading above 1.8315 after activating Thursday’s bullish Pin bar price action pattern. While the main range extends from the support at 1.8160 up to 1.8575, the pair still maintains a valid downtrend configuration for the month of May, with Lower Highs and Lower Lows. As such, traders will be reluctant to target the upper side of the range while there’s a strong possibility for the pair for form another lower high between 1.83-1.84 and dip lower to attack the support once again.
Around 1.8330 the pair will encounter a Fibonacci Confluence which also coincides with a pivot zone from early April. A rejection here maintains the Lower High configuration. On the other hand, a break above this level opens the way towards 1.8406/25, where the 200 Simple Moving Average on the 4H time frame provides resistance alongside the 61.8% Fibonacci Retracement level from 1.8585 down to 1.8170.
4H Stochastic is no longer in oversold territory, which allows the pair to sell-off on any rejections from the previously mentioned resistance levels. While GBP/CAD is trading below 1.8425 a return to 1.8160 is favored, thus selling rallies remains the preferred strategy at this point.
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Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets
