This sterling pair seems to be struggling to sustain its recent trend, and a chart pattern is forming to suggest a potential reversal.
GBP/CAD made a couple of failed attempts to bust through the 1.7850 minor psychological mark and is now testing the double top neckline support around 1.7700.
Will we see a break lower and downtrend soon?
GBP/CAD 4-hour Forex Chart by TradingView
A few misses in U.K. economic data releases this week appear to be dragging the pound lower, as traders look ahead to another likely Bank of England (BOE) interest rate cut.
In particular, the average earnings index fell short of market estimates, suggesting weaker inflationary pressures, while the monthly GDP reading also turned out weaker than expected. Underlying data, including the goods trade balance and industrial production figures, reflected weak spots.
Can these be enough to put further downside pressure on GBP/CAD?
Remember that directional biases and volatility conditions in market price are typically driven by fundamentals. If you haven’t yet done your homework on the British pound and Canadian dollar, then it’s time to check out the economic calendar and stay updated on daily fundamental news!
The pair is already testing the 200 SMA dynamic inflection point that lines up with the neckline support, so keep an eye out for a breakdown that could be followed by a drop that’s the same height as the chart pattern or 150 pips.
Stay on the lookout for potential bounces off the support zones at S2 (1.7650) then S3 (1.7600) as these line up with psychological levels, too.
However, the 100 SMA is still above the 200 SMA to hint that support is more likely to hold than to break, possibly spurring another bounce back to nearby resistance levels at the pivot point (1.7790) or even R1 (1.7870).
Don’t forget to practice proper risk management and stay aware of top-tier market catalysts when trading this one. Good luck!