Is a Reversal Looming in GBP/CAD?

by Charalambos Pissouros
11:35, 2020/12/29

GBP/CAD tumbled on Monday, but hit support at the crossroads of the 1.7250 level and the upside support line drawn from the low of December 11^th, and then, it rebounded. However, during the Asian trading today, the pair hit resistance at 1.7328 and pulled back. At the time of writing, it is testing the upside line again, where a break may signal a bearish reversal.

In our view, the break below the upside line would be confirmed upon a dip below yesterday’s low of 1.7250. This would also confirm a forthcoming lower low on the 4-hour chart and may initially pave the way towards the low of December 22^nd, at 1.7200. If that zone is not able to halt the slide, then its break may carry larger bearish implications, perhaps setting the stage for the low of December 21^st, at 1.7050.

Shifting attention to our short-term oscillators, we see that the RSI turned down after it tested its 50 level as a resistance, while the MACD, although fractionally positive, lies well below its trigger line and looks ready to enter negative waters. There is also negative divergence between both the indicators and the price action. All this suggests that the rate may start picking up downside momentum very soon, which increases the chances for a break below the aforementioned upside line.

In order to start examining the case of another positive wave, we would like to see a rebound back above 1.7328. This may signal that traders want to keep this pair above the upside line for a while longer, and may pull the trigger for the 1.7437 hurdle, marked by yesterday’s high. Another break, above 1.7437, may open the path towards the 1.7485 level, defined as a resistance by the peak of last Thursday.

GBP/CAD 4-hour chart technical analysis

Disclaimer:

The content we produce does not constitute investment advice or investment recommendation (should not be considered as such) and does not in any way constitute an invitation to acquire any financial instrument or product. The Group of Companies of JFD, its affiliates, agents, directors, officers or employees are not liable for any damages that may be caused by individual comments or statements by JFD analysts and assumes no liability with respect to the completeness and correctness of the content presented. The investor is solely responsible for the risk of his investment decisions. Accordingly, you should seek, if you consider appropriate, relevant independent professional advice on the investment considered. The analyses and comments presented do not include any consideration of your personal investment objectives, financial circumstances or needs. The content has not been prepared in accordance with the legal requirements for financial analyses and must therefore be viewed by the reader as marketing information. JFD prohibits the duplication or publication without explicit approval.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72.57% of retail investor accounts lose money when trading CFDs with the Company. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Please read the full Risk Disclosure.