GBPCAD has been in a strong downtrend as it formed lower waves inside a forex trend channel, with a potential corrective wave FX signal materializing. The pair is on its way to test the 1.8000 major psychological level, which coincides with the falling channel support.
Stochastic is already in the oversold zone, an FX signal confirming a possible bounce. However, the oscillator has yet to cross out of the region before reflecting a return of buying momentum.
FX Signal Forecast
Going long at the 1.8000 mark would be a countertrend FX signal play, which suggests a lower probability from a technical standpoint. From a fundamental perspective though, the British pound could enjoy more support compared to the Canadian dollar in the near term.
For one, the BOE recently showed that some policymakers are inclined to hike rates right away, as the pickup in the economy could warrant tightening sooner or later. However, data from the UK has disappointed, with CPI, retail sales, and mortgage approvals recently coming in below estimates.
As for the Canadian dollar, manufacturing data have been weak recently and the drop in commodity prices might take its toll on the country’s trade revenues and growth. The BOC has a relatively cautious stance, as Poloz has indicated that they’re not ready to tighten in the foreseeable future.
However, strong selling pressure could keep the pair from bouncing and fulfilling the long FX signal. A downside break below 1.8000 could be a signal that further losses are in the cards for GBPCAD.
On the other hand, a bounce could lead to a test of the channel resistance near the 1.8450 minor psychological level. A slow rally could lead to an FX signal bounce only up to the mid-channel area of interest somewhere between 1.8250-1.8300.
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