GBPCAD is currently on a strong uptrend and has just pulled back to the rising trend line support visible on the 4-hour time frame. The pair seems ready to bounce and resume the climb, as the 100 SMA and trend line are holding as support.
The pair could move back up to the previous highs around the 2.0600 levels or higher if the uptrend resumes. The 100 SMA is above the longer-term 200 SMA, confirming that the path of least resistance is to the upside.
Stochastic is also on the move up but is nearing the overbought zone, indicating that a potential selloff might take place. Meanwhile, RSI is still climbing, which means that bullish momentum is present. However, a break below the trend line support around the 2.0200 area of interest could mean more losses for GBPCAD.
Earlier this week, the UK printed a stronger than expected increase in hiring, although wage growth was slower than expected. Nonetheless, traders still seem to be counting on a potential BOE rate hike sometime next year since policymakers sounded relatively upbeat on growth prospects.
On the contrary, the Loonie could continue to be weighed down by falling prices since WTI crude oil hit a six-year low yesterday. The OPEC oil cartel has no plans of reducing production while Iran has even pledged to increase its supply, weighing further on price levels. In addition, the Chinese central bank’s decision to devalue their currency could mean weaker import demand, also weighing on prices.
Canadian manufacturing sales data is up for release today and a 2.3% rebound is eyed. Stronger than expected results could mean gains for the Canadian currency while a weaker than expected figure could spur further losses. Only the low-tier construction output report is lined up from the UK and a 2.4% increase is expected.
By Kate Curtis from Trader’s Way