The GBPCAD pair finds itself caught between cautious optimism and persistent downtrend pressure in the pre-holiday market. Recent UK retail sales data surprised on the upside, offering a glimmer of hope for the British economy.
However, softer GDP growth and ongoing political uncertainty continue to weigh on the Pound. Meanwhile, the Canadian Dollar benefits from hawkish expectations surrounding the Bank of Canada due to elevated inflation. This divergence in central bank outlooks fuels the bearish bias in the GBPCAD, but softening oil prices provides some counterbalance.
Technical
The GBPCAD currently hovers at 1.67879 within a descending channel. Key moving averages, the 20-SMA (green), 50-SMA (blue), and 100-SMA (orange), all slope downwards, reinforcing the bearish trend. However, a flat RSI (33.05) suggests potential price stability.
Short-term trading opportunities could exist towards the initial resistance at 1.68414 if the upward momentum is sustained. A break above this level would open doors towards 1.68990. Bears, on the other hand, might push the price towards the initial support at 1.67564. A break below this level could trigger further declines towards 1.67062.
Summary
The GBPCAD pair navigates a complex environment with GBP influenced by political instability and BoE decisions, while CAD gains strength from robust inflation and a hawkish Bank of Canada.
Technicals suggest potential short-term movements and market sentiment adds an extra layer of uncertainty.
Sources: TradingView, Reuters.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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