Image © Bank of Canada
- GBP/CAD finds a floor at long-term average
- Potential for more upside subject to break above highs
The Pound-to-Canadian Dollar exchange rate opens the new week at 1.6898, after falling 0.60% in the week before.
Studies of the charts show mixed forces at play, but we see a marginal bias towards more upside given the more established longer-term trends.
The 4 hour chart - used to determine the short-term outlook, which includes the coming week - shows the pair, on the one hand, forming the outline of a bearish double top reversal pattern but, on the other, finding a floor at a tough support level.
One possibility is that the pair may trade sideways due to the opposing bearish and bullish forces canceling each other out.
Another possibility is that nulls win out and the pair starts rallying again, with a break above the 1.6990 November 6 highs providing confirmation for a move up to 1.7100.
If the pair can successfully break below the tough underpinning support level, confirmed by a move below 1.6850, then there is also a possibility the double top will finish forming with a move down to the neckline at the base of the pattern at 1.6725.
The daily chart shows how the pair has found support at the level of the 200-day moving average (MA) at 1.6863 and rebounded.
The double top that was forming now looks a little misshapen and may never complete.
The strength of the uptrend as well as the ‘look and feel’ of the charts, now, biases the chart to more upside.
A break above the 1.7094 highs would lead to a probable continuation higher to a target at circa 1.7200 at the level of the trendline and a larger MA.
The daily chart is used to give us an indication of the outlook for the medium-term, defined as the next week to a month ahead.
The weekly chart shows how the pair rose up to just shy of the 200-week MA at circa 1.7188.
This is likely to act as an obstacle to further gains.
A clear break above, however, confirmed by a move above 1.7250, would give the uptrend a new lease of life and probably see a continuation evolve higher, to a target at 1.7790 and the March highs.
The weekly chart is used to give us an idea of the longer-term outlook, which includes the next few months.
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