Technical Sentiment: Bullish
Key Takeaways
GBP/CAD sellers failed again and again last week in their attempt to price in a fresh Lower Low, despite largely disappointing favorable UK data and a slightly bullish bias for the Canadian Dollar.
The pair is currently consolidating above a huge support cluster at 1.812, level strengthened by the 200-Day Simple Moving Average. During the European session GBP/CAD saw steady buying up to 1.8200, inciting a test of the resistance trendline and the nearby price pivot zone located between 1.8225/35. A continuation above these levels will trigger stop losses from trend traders, which in turn will escalate the rally up to the next resistance cluster.
Lacking any economic triggers, a technical correction up to 1.8320 seems very plausible at this point. This cluster was a decent price pivot zone in the past; right now it marks the 50% Fibonacci retracement from the High at 1.8518 to the current low, with additional strength from the 200 Moving Average on 4H. Stochastic is extremely oversold on Daily, confirming a bottom & bounce scenario.
A bearish rejection around 1.8225/35 will indicate a prolonged consolidation for GBP/CAD, in which case traders are advised to exclusively trade breakouts above and below the current boundaries.
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Prepared by Alex Z., Chief Currency Strategist at Capital Trust Markets
