GBP/CAD traded north yesterday after it hit support near the key crossroads of the 1.7600 level, the 50-EMA, and the short-term uptrend line drawn from the low of the 10th of January. However, today, the pair has been trading in an indecisive mode near the 1.7710 barrier, perhaps waiting for Canada’s CPI data later in the day. As long as the pair continues to trade above the aforementioned short-term uptrend line, we believe that the near-term outlook remains positive.
That said, the pair’s forthcoming direction is likely to depend on Canada’s CPI data. Expectations are for a notable slowdown, to +1.4% yoy from 1.9%, which could encourage GBP/CAD bulls to take charge and aim for a test near the 1.7815 territory, defined by the peaks of the 10th and 18th of May. As for more bullish extensions though, we would like to see a break above 1.7855, the high of the 5th of May. Such a break could set the stage for the psychological zone of 1.8000.
Looking at our short-term oscillators, we see that the RSI, although above 50, has been drifting lower today, while the MACD, even though above both zero and trigger lines, shows signs of topping. These momentum indicators suggest that there is a chance for a corrective setback before the next positive leg, perhaps for a test near the short-term uptrend line.
If that line does not hold, then the setback could be extended towards the 1.7600 support. Another break below that level could aim for our next hurdle of 1.7550, which currently coincides with the 100-EMA. This could be the case if we get an above-consensus CPI figure from Canada today.
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Article written by Charalambos Pissouros, Senior Market Analyst at JFD Brokers
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