Is the pound ready to pop higher against the Loonie?

I’m taking a look at GBP/CAD’s reaction to 1.7300 for a possible trip to a longer-term trend line resistance.

Before moving on, ICYMI, today’s Daily Asia-London Session Watchlist looked at a possible range breakout on AUD/USD on the back of risk-taking after the Fed’s statement. Be sure to check that out to see if there is still a potential play!

Fresh Market Headlines & Economic Data:

  • New Zealand economy contracts in Q4, cooling rate hike talk
  • RBA: two key fundamental determinants of the exchange rate are the terms of trade and the differences between interest rates in Australia and those in major economies
  • Australia unemployment drops to 5.8% as recovery strengthens
  • Japan to lift Tokyo area state of emergency as planned on Sunday
  • BOJ to widen band around long-term rate target on Friday – Nikkei
  • Stocks cheer dovish Fed, yen supported before BOJ decision

Upcoming Potential Catalysts on the Economic Calendar:

  • ECB’s Lagarde to testify before a European Parliament Committee in Brussels at 8:00 am GMT
  • Eurozone’s trade balance at 10:00 am GMT
  • BOE’s policy decision at 12:00 pm GMT
  • Canada’s ADP non-farm employment at 12:30 pm GMT
  • U.S. initial jobless claims at 12:30 pm GMT
  • U.S Philly Fed index at 12:30 pm GMT

What to Watch: GBP/CAD

GBP/CAD 1-hour Forex Chart

GBP/CAD 1-hour Forex Chart

Is the pound ready for a reversal against the Loonie?

As you can see, GBP/CAD found support at the 1.7300 psychological handle and has since formed a potential reverse head and shoulders-like pattern on the 1-hour time frame.

Today’s Bank of England (BOE) decision can make or break the pair’s pattern today.

While markets aren’t expecting the central bank to make policy changes this month, they do expect Governor Bailey and his team to be a bit more optimistic on the economy’s prospects.

Just like the Fed, though, the BOE will likely work to reassure markets that they’re not planning on tapering their easy policy measures anytime soon.

If the BOE succeeds in encouraging risk-taking, then GBP/CAD could break above the reverse head and shoulder’s “neckline” and hit the trend line resistance near the 200 SMA.

But if the BOE spends a bit too much time highlighting downside growth risks, or if traders just plain favor the Loonie over the pound in the next trading sessions, then GBP/CAD could extend its longer-term downtrend to make new March lows.