GBP/CAD is retesting a major resistance area on the daily chart. Will that draw in the bears to take back control one more time?
GBP/CAD Resistance Retest?
On the daily chart of GBP/CAD above, we’ve got the market retesting a major area of resistance between the 1.7500 – 1.7800 area. This area has turned the bulls over the past year and beyond, which raises the odds of technical players potentially hopping in once again.
From the fundamental front, U.K. economic updates have been arguably weaker through out January with weaker-than-expected updates on manufacturing PMI, retail sales, and a fall in GDP. Unemployment data did improve, but it might not be enough to bring in Sterling bulls with U.K. lockdowns potentially extending until March.
As far as the Loonie, Canada economic updates haven’t been anything to write home about either with inflation and jobs data disappointing in January. Oil prices have been some what of a crutch for CAD through the last few weeks, but with demand concerns rising as lockdown restrictions rise, we may see volatility come soon for both the Canadian dollar and oil.
Coming next week to get the Loonie going will be the latest employment update from the government, as well as business sentiment data. If these do not severely disappoint, there’s a chance that the Loonie could out perform Sterling once again and keep the range pattern in GBP/CAD going.
So, we’re on the look out for that scenario of bearish BOE meeting and “not-so-terrible”/ better-than-expected Canadian business sentiment / jobs data to play the resistance on GBP/CAD. Scaling into a short position from current levels up to 1.7700 makes sense as an entry strategy for aggressive traders, while waiting for a further pop higher might make sense for more conservative traders looking to play the short side.
If we get the opposite scenarios of an optimistic BOE statement and disappointing Canadian data, then an upside breakout scenario is the likely next move, especially if broad risk sentiment leans negative to push oil prices lower.
What do you all think? Are you watching GBP/CAD for a potential trade? If so, what’s your directional bias and entry strategy? Let me know in the comments section below!
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