Those hoping for a stronger Pound against the Canadian Dollar might have to excercise more patience as we are yet to see concrete signs the GBP/CAD is ready to go higher.
After establishing new lows at 1.5834 on the 8th of September the Pound-to-Canadian Dollar has rallied - in line with a broad recovery in Sterling - and encountered stiff resistance from a trendline at 1.6180.
The exchange rate is now at a make-or-break technical level - if it breaks above the trendline the outlook will turn very bullish; if the pair fails to break higher it will confirm the trend is down and we will expect a break below the lows and an extension lower.
We are told risks remain tilted to the downside, rather than potentially heading for an upside break:
"The GBP’s initial probe fractionally above the trend line has stalled, however. After the sharp gains seen earlier in the week, the near-term risk for the pound appears to be tilted lower again. Intraday patterns are bearish (via an outside range session on the 6-hour candle chart)," says Shaun Osborne, an analyst with Scotiabank.
Without a close above the trendline, our studies would concur with those conducted by Osborne; that the downtrend is still intact and therefore continue to forecast more downside, contingent, that is, upon a break occurring below the 1.5834 lows.
Such a break would probably yield a downside target at 1.5700 - the next round number below 1.58.
The MACD is flatlining and giving us little help in relation to where the pair is likely to go next - in fact, if anything it might suggest a period of sideways consolidation.
The Pound is set to experience considerable volatility on Thursday, September 14 when the Bank of England meet to vote on their interest rate policy.
The current consensus appears to favour a hawkish 'hold' with either a 7-2 vote as before or even a 6-3, if Haldane dissents to the hike camp.
In the event of a hawkish hold scenario, the Pound is expected to rise significantly as it will put a rate hike proper on the table in November, at least according to analysts at ING.
The Canadian Dollar (Loonie) is one of the strongest of the G10 currencies due to very positive recent economic data and a central bank which appears to embark on a tightening cycle in and has already raised interest rates twice in 2017.
So, if there is a currency the Pound will not be reversing trend against it is probably the Loonie.
Get up to 5% more foreign exchange by using a specialist provider by getting closer to the real market rate and avoid the gaping spreads charged by your bank for international payments. Learn more here.