GBPCAD is still trending lower but signs of a pullback are materializing. Price bounced off the 1.6700 major psychological level and is nearing the 38.2% Fib on the 1-hour time frame.
At the moment, the 100 SMA appears to be holding as dynamic resistance. In that case, price could resume its drop to the previous lows or create new ones if bears apply more pressure. Still, a larger correction to the 38.2% Fib or 200 SMA could be possible. The line in the sand for any pullback might be the 61.8% Fib at 1.7200, which lines up with a former support zone.
The 100 SMA is below the 200 SMA so the path of least resistance is to the downside. Stochastic is on the move down, signaling that sellers are in control of GBPCAD price action, and RSI is heading south as well.
Event risks for this setup include the BOC statement and the BOE statement. No rate changes are expected from the Canadian central bank, as the oil market appears to be recovering while data from Canada hasn’t been so bad. Meanwhile, the BOE is expected to increase its stimulus program in order to keep the economy supported in a Brexit.
However, traders appear to have priced in this stimulus already, as BOE Governor Carney previously mentioned this possibility in a recent testimony. With that, profit-taking could ensue during the actual announcement, especially if the amount of stimulus is smaller than expected.
Data from China could also have an impact on CAD price action, as the world’s second largest economy is set to print its GDP, fixed asset investment, industrial production, and retail sales figures on Friday. And as always, oil price movements could also determine where the Canadian currency might be headed next.