The GBP/CAD is up 0.15% this Thursday after two consecutive days of weakness. This comes as crude oil price on the Brent benchmark takes a breather from three days of gains, putting the Loonie on the back foot. However, the overall sentiment on this pair remains bearish as crude oil fundamentals continue to assume an overall bullish tone, which is expected to benefit the Canadian Dollar at the expense of a battered Pound.
Some weeks back, the Bank of England’s pessimistic outlook on the UK economy triggered the current round of bearishness on the pair. This week’s dismal manufacturing PMI data and the steep drop in the CBI Business Expectations Index have helped to weaken the Pound further.
Conversely, three days of solid demand for crude oil as the Iran nuclear negotiations stall and market rumours of an OPEC + oil production cut has seen the commodity-linked CAD gain traction this week. These triggers have combined to send the GBP/CAD lower by 0.29% this week. The GBP/CAD is on the path toward a third successive weekly loss, having dropped 0.71% and 0.86% in the previous two weeks.
The breakdown of the support at 1.55227 (15 June and 8 August 2022 lows) completed the descending triangle pattern. The accompanying decline took out the support at 1.53556, formed by the previous lows of 13 July and 22 July. The bears need to take out the 1.52487 support level to complete the triangle’s measured move at 1.51233.
If this plays out as expected, the 22 March 2010 low at 1.51233 will become an additional target to the south. Further price deterioration brings the 1.50068 psychological price mark and 14 June 2010 low into the mix as a new downside target. Below this level, the 1.48379 price mark becomes the next target to the south, representing a prior low last seen on 3 May 2010.
On the flip side, any upside retracement move by the bulls following a bounce on any of these support targets must clear the 1.55227 resistance and the triangle’s descending border to further the recovery.
This recovery move would have the chance of aiming for 1.57043 (3 June and 10 August high) in this circumstance. An additional barrier lies at 1.57875 (13 May and 27 June lows). The bulls must uncap this resistance barrier before the 1.59072 and 1.59935 become viable upside targets.