GBPCAD is in the middle of a forex correction, as the pair has retreated to the 38.2% Fibonacci level based on the latest swing high and low on the 4-hour chart. At the same time, price is testing the resistance at the longer-term exponential moving average, which has held as a dynamic inflection point in the past.
Stochastic is also on its way down, indicating that selling pressure is building up and that the pair could resume its drop tot he previous lows near the 1.8200 major psychological level. Increased selling pressure might even lead to the formation of new lows.
Forex Correction Outlook
The 38.2% Fibonacci level also lines up with a former support zone around the 1.8500 major psychological level, which might keep further gains in check. However, an upside break from this resistance areas could mean a larger forex correction up to the next Fibonacci levels or a potential reversal.
The path of least resistance is to the downside, as the UK recently printed a disappointing GDP reading. Growth came in at 0.3% for the first quarter of the year, lower than the projected 0.5% expansion and the previous quarter’s 0.6% growth. Meanwhile, BOC Governor Poloz has noted that the Canadian economy has seen a lot of improvements and that no further rate cuts are necessary.
There are no major events lined up from both economies today but these diverging fundamental biases might be enough to keep the downtrend intact. Market catalysts scheduled for the day include the FOMC statement, which might also indirectly affect the Canadian dollar, and the RBNZ interest rate decision.
An upbeat FOMC statement could favor the Canadian dollar since the country has close ties to the US economy. On the other hand, a dovish rhetoric could lead to losses for the Canadian currency, as this might mean weaker demand for its products in the coming months.
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