The GBPCAD is pushing higher, as are most other GBP pairs on the back of a surprise hawkish vote by the Bank of England’s Monetary Policy Committee. The Bank of England (BoE) was expected to leave rates unchanged at 0.75% (which they did), but market analysts were on the lookout for the voting pattern. Markets had expected a voting pattern of 0-3-6; with one more board member expected to join the votes for a rate cut. This expectation stemmed from statements of at least two MOC board members who had indicated a willingness to vote for a rate cut if economic conditions did not improve. However, the new voting pattern did not materialize, and the British Pound has responded positively on the eve of Brexit.
The GBPCAD is now trading higher on the day at 1.72711.
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Technical Outlook for GBPCAD
The Canadian Dollar has had a very bearish week on the back of falling crude oil prices, which was a response to the coronavirus outbreak and the risk-off sentiment it triggered off. Commodity currencies have therefore been on a slide. The BoE’s action, therefore, provides an excellent basis to trade the GBPCAD.
The daily chart shows the GBPCAD pair trading within a rather wide ascending channel. The 4-hour chart shown below paints the intraday picture of what is happening within the channel. Here, we see the GBPCAD approaching the resistance level seen at 1.73194 (lows of April 2019 in role reversal). Price is also breaking out of the bullish flag within the channel, providing further impetus for higher price push by the GBPCAD.
A break of the 1.73194 resistance level could target upside targets at 1.74552 (24 April and 9 December 2019 highs) and potentially at 1,75385 (previous highs of 26 February 16 April and 18 December 2019).
Failure to breach 1.73194 could lead to a potential pullback to 1.70884, which is where the flag’s lower border intersects the previous highs of 16 October, 1 November 2019 and 17 January 2020, acting in role reversal. But before this, the flag’s upper border could be a potential pitstop.
1.69845 lies underneath and could come into focus if a fundamental shift in the GBP sentiment occurs. This move would invalidate the flag and break down the channel.