GBP/CAD traded lower during the European morning Tuesday

GBP/CAD

• The dollar traded mixed against its major G10 counterparts during the European morning Tuesday. It was higher against CHF and GBP in that order, while it was lower against NZD, NOK, AUD and EUR. The greenback was stable vs SEK, JPY and CAD.

• The British pound plunged after the 1st estimate of UK GDP for Q1 showed a rise of only +0.3% qoq and +2.4% yoy, a slower pace from +0.6% qoq and +3.0% yoy previously. The figures were below expectations and added to the building uncertainty ahead of the UK general election next week. It’s important to note however that the disappointing figure is the first estimate and incorporates only about 44% of the information that will eventually be available. It’s quite likely that it will be revised, although it could be revised down as well as up. GBP/USD fell to find support around 1.5180 but bounced up in the following minutes to trade few pips below our resistance line of 1.5260. The inability of the bears to push the rate lower despite the weak data and the strength of bulls to recover the drop immediately and push the rate higher make me believe that we could see the pair at higher levels: perhaps towards our next resistance of 1.5330 if the 1.5260 obstacle is violated.

• GBP/CAD traded lower during the European morning Tuesday, following the disappointing UK GDP figure. However, bearing in mind that the rate is still trading within a short-term upside channel, I see a positive near term picture. Even if the current pullback continues, I would expect it to stay limited above the support line of 1.8335 (S1) and to provide renewed buying opportunities. A rebound from near 1.8335 (S1) and the lower line of the aforementioned channel could aim for another test at the psychological line of 1.8500 (R1). Switching to the daily chart, I see that on the 17th of April, GBP/CAD rebounded from near an upside support line taken from back the low of the 21st of November, and also from near the 76.4% retracement level of the 8th of January – 24th of February rally. What is more, the 14-day RSI raced higher and is now testing its 50 line. It could move above 50 soon, while the daily MACD, although negative, has bottomed and crossed above its trigger line. The technical signs derived from the daily chart support the case that we are likely to see the pair trading higher in the not-too-distant future. Bank of Canada Gov. Poloz and Senior Deputy Gov. Wilkins appear at the House of Commons Standing Committee on Finance later this afternoon.

• Support: 1.8335 (S1), 1.8260 (S2), 1.8160 (S3).

• Resistance: 1.8500 (R1), 1.8575 (R2), 1.8690 (R3).