* Pound to Canadian Dollar exchange rate could extend its near-term recovery
* Scotiabank only willing to turn bullish if 1.69 is broken.
GBP/CAD has been rising through the course of the week having opened 1.6512 and climbed to 1.6650 at the time of writing.
It has been a gentle climb, but a climb nevertheless.
What is certain is that the strong recovery that we saw in the from mid-October through to to November 11 has faded and given way to a sideways orientated move.
Much of the renewed strength in the Canadian Dollar lends itself to the impressive recovery in global oil prices which were boosted by concerted efforts by OPEC members to stem supply.
The resultant prices rises have aided CAD which relies heavily on crude exports to keep its foreign exchange reserves topped up.
The recent fading in oil price advances has allowed GBP the chance to recover some lost ground hence the mini revival in Sterling's fortunes seen this week.
Technicals also appear to be having an influence on GBP/CAD at this stage and our studies suggest the pair remains supported by the 50-day moving average.
It appears traderes are using the 50 day M.A to place buy orders from which to capture rebounds.
The nascent recovery has also triggered the formation of a bullish Harami Japanese candlestick pattern which suggests more upside for the pair.
In addition, the exchange rate seemed to complete an a-b-c corrective pattern lower from the November 11 highs, since ‘a’ roughly equals ‘c’ in time and length.
This suggests the correction may be complete and combined with the bullish Harami and support for the 50-day builds a compelling case for a reversal and further upside, to 1.6800.
Those with imminent payment needs on GBP/CAD could use this as a decent area to place a limit order to ensure they catch an beneficial moves in the pair.
The MACD indicator is, however, not giving its support, crossing bearishly below its signal line and suggesting the possibility of more downside.
In his last report on the pair Scotiabank’s Shaun Osborne changes from being outright bearish to bullish in the short-term, saying “near-term risks are tilting back higher.”
Overall, he remains bearish, however, pointing to the negative weekly chart and suggesting traders “fade GBP gains in the short run and look for a retest of 1.58/1.60.”
Osborne does however add that:
“We will turn bullish in the event of a break above 1.69 only at this point.”