GBPCAD has been moving sideways, finding support at 2.0150 and resistance at 2.0300. At the moment, the pickup in oil prices is supporting the Canadian dollar but another tumble could mean a bounce off the bottom of the range.
The 100 SMA just crossed below the longer-term 200 SMA, signaling that the path of least resistance is to the downside. A break below the range support could mean a drop of at least 150 pips, which is roughly the same size as the current rectangle pattern.
Stochastic is starting to turn from the overbought region, signaling a potential selloff. Meanwhile, RSI is on middle ground and hardly giving any strong technical clues at the moment.
GBPCAD Fundamental Factors
There are no economic reports due from both the UK and Canada today, which suggests that the current consolidation pattern could carry on. However, commodity prices could continue to influence the Loonie’s flows, with another climb in oil likely to spur a range breakdown.
In terms of fundamentals, the pound is looking stronger compared to the Canadian dollar since the BOE has mentioned that they’re moving closer to hiking interest rates. On the other hand, the BOC has just cut rates in their policy meeting this month in order to shield the economy from further declines in oil prices.
Other potential sources of volatility could be the release of the Canadian GDP tomorrow, along with the UK GfK consumer confidence index. The Canadian economy could show a flat GDP reading for the month of May, following the previous month’s 0.1% contraction. A worse than expected reading could lead to a sharp Loonie selloff and a bounce back to the range resistance for GBPCAD.
Meanwhile, the UK GfK index is expected to dip from 7 to 5 but analysts are hoping for an upside surprise since wage growth has been strengthening in recent months, possibly shoring up financial confidence.
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