GBPCAD has formed higher lows and found resistance at the 1.7400 major psychological level, creating an ascending triangle formation. Price just bounced off the support and might be due for a test of resistance again.
The 100 SMA is above the 200 SMA for now but looks prime for a downward crossover, possibly hinting at a downside break of support and a resulting selloff. The 100 SMA also seems to be holding as dynamic resistance.
Stochastic is already indicating overbought conditions so seller could be taking the upper hand from here. RSI is also moving south to GBPCAD could follow suit. If a triangle breakout takes place, the resulting trend could last by around 400 pips, which is the same height as the chart formation.
Weak crude oil prices are currently weighing on the Canadian dollar, as traders seem to be counting on another increase in inventories and a rise in US oil rig counts, driving supply higher while demand remains slow in the summer. Meanwhile, expectations of a BOE rate cut are also keeping the pound’s gains in check.
Yesterday the UK manufacturing PMI was revised down from 49.1 to 48.2, reflecting a sharper than expected contraction in the industry after the EU referendum. Construction and services PMI are still up for release throughout the week and similar downgrades are expected.
However, the bigger market mover for this pair might be the actual BOE policy statement on Thursday since the central bank is widely expected to cut interest rates by 0.25% to keep the economy afloat. In their previous decision, most policymakers voted to stay on hold while only one MPC member wanted a rate cut then.