Is GBP/CAD set to drift further south?

GBP/CAD traded lower today, after hitting resistance at the crossroads of the 1.7060 level and the downside resistance line taken from the high of January 6^th. The fact that the rate is trading below that line but also below the key barrier of 1.7090, keeps the short-term outlook negative in our view.

At the time of writhing, GBP/CAD is trading slightly below the 1.6990 zone, and we would expect the bears to push the action down for a test at 1.6940 barrier, marked by the low of December 16^th, the break of which could aim for the low of December 14^th, at 1.6895. If the bears are not willing to stop there, then a break lower could see scope for declines towards the low of December 13^th, at 1.6830.

Taking a look at our short-term oscillators, we see that the RSI turned down after hitting resistance near its 50 line, while the MACD has topped slightly below zero and crossed below its trigger line. Both indicators detect downside momentum and support the notion for further declines in this exchange rate.

On the upside, we would like to see a clear break above 1.7090 before we start examining a bullish reversal. The rate would already be above the downside line taken from the high of January 6^th, and thus, the bulls may decide to travel towards the 1.7190 barrier, marked by the high of January 14^th. If they are willing to go higher, we may see them aiming for the 1.7245 level, marked by the high of January 7^th, the break of which could set the stage for advances towards the peak of January 6^th, at 1.7315.