GBP/CAD is trading sideways above the key 1.66 support level.
The support level is at risk of giving way, however, and leading to a breakdown in the pair, remarks a leading bank analyst.
"GBP is putting the consolidation base in the low 1.66 area under more pressure.
"We continue to view 1.66 as pivotal from a longer-term point of view as this was the base of the Q3 consolidation and retracement support on the long-term chart (76.4% of the 2013/2016 rally).
"A low close on the week should prompt further softness in the cross back towards 1.58/1.60. We continue to view GBPCAD strength as a selling opportunity," said Scotiabank's Saun Osborne.
We also see the 1.66 area as a key tipping point but would require a break below the 1.6473 lows to confirm more downside.
Such a move would indicate exchange rate peaks and troughs had reversed and that the short-term trend was probably now down.
The bearish MACD, which is below the zero-line and therefore indicating the exchange rate is in a downtrend corroborates a more negative outlook.
Scotiabank's Saun Osborne notes, "
A break below the 1.6473 lows would probably lead to a move down to a target at 1.6375 where the S1 monthly pivot is situated, which is a level traders watch since it acts as an obstacle to price evolution.
Despite our base case scenario for more downside there is still a possibility the uptrend could recover.
The recent correction was a classic a-b-c three wave correction and now it is finished the uptrend would be expected to resume.
A break above 1.6800 would probably see the exchange rate rise to 1.7000.
Oil Fails to Pull Up Flagging CAD
The sharp rally in crude failed to pull up the Canadian Dollar (loonie) last week despite the close correlation between the two.
It may be that political uncertainty in relation to Donald Trump’s reactionary politics and attitude to international may be the root cause.
There was no boost from the Bank of Canada (BOC), which remains on hold and likely to for some time.
Parallels with the Pound
There are parallels with Sterling which seem to indicate the possibility of further sideways moves in the currency pair in the week ahead.
Sterling too is under pressure from uncertainties in the political sphere linked to trade, only in the case of the Pound it is Brexit uncertainty.
The Bank of England (BOE) has also adopted a neutral stance at last week’s BOE meeting and looks unlikely to shift policy in 2017.
Data for the Canadian Dollar
The big release for the Canadian Dollar in the coming week is CPI and Core CPI in November, released on Wednesday, December 21 at 13.30 (GMT) – it is expected to show a -0.2% fall in prices month-on-month.
Core Retail Sales, out at 13.30 showed a 0.7% rise in sales month-on-month in October.
CIBC Market's Jeremy Stretch has said it is a "big" week for Canadian data and should keep markets for the Loonie busy during the holiday season, although he is bearish CAD, at least versus the Dollar anyway.
"The combination of wholesale trade sales (Tuesday), retail sales and CPI (including the new BoC measure) and GDP (Friday) is expected to keep Canadian markets busy and potentially provide some measure of volatility into the holidays," said Stretch.
Data in the week ahead for the Pound
The main release for the Pound is third quarter GDP, on Friday, December 23, which is forecast to show a 2.3% rise year-on-year and a 0.5% rise quarter-on-quarter in Q3.