GBPCAD recently broke below a rising wedge pattern on its 4-hour time frame. Price has found support at the 1.7050 minor psychological level and is currently pulling up to the 38.2% Fibonacci retracement level.
A higher correction could last until the broken range support near the 1.7350 minor psychological level. Resistance might also be found at the 50% level, which is close to the moving averages. The 100 SMA seems to be crossing below the 200 SMA to indicate stronger selling pressure.
Stochastic is moving down from the overbought level to show that pound bears are taking control of price action. Similarly RSI is starting to head south so GBPCAD could follow suit. In that case, price could head back to the previous lows or much lower. Note that the wedge is approximately 500 pips tall so the resulting selloff could last by the same number of pips.
Data from Canada came in weaker than expected on Friday as the economy lost 31.2K jobs during the month versus the projected 10.2K gain. The unemployment rate climbed from 6.8% to 6.9% as expected. As for the UK, the Halifax HPI indicated a 1.0% drop in house prices versus the estimated 0.1% dip.
Still, the downside pressure on the pound could be stronger since the Bank of England just cut interest rates and increased their stimulus efforts. The Bank of Canada has refrained from easing policy in their latest statement and isn’t due to meet again until September.
For now weaker oil prices are weighing on Loonie gains, as another round of speculations of higher inventories for this week could keep a lid on crude oil rallies. The UK manufacturing production report is the only catalyst scheduled for the pound this week and a flat reading is eyed.