GBP/CAD: The Canadian Dollar may weaken a bit before the Pound Sterling bows again

June 4, 2014 in Chart Alert

GBP/CAD continues the recovery from 1.8100 but the jump from that support was a natural one, considering the psychological aspects of 1.8000 ranges. The daily MACD has given a bullish signal but let’s see if the push is expected to continue or a failure to sustain is in line.

GBP/CAD daily chart with MACD: GBPCAD gets a bullish signal by daily MACD.

The above chart is also showing a short-term trend line. On one hand this line is indicating a resistance near 1.8375 to 1.8395, but on the other hand is also suggests that some more gains towards that resistance zone can, very well, be expected. While we are on thos, let’s have a look on another GBP/CAD chart with daily Ichimoku cloud.

Another GBP/CAD char with daily Ichimoku cloud indicating resistance zone which is same as the resistance zone of the trend line.

The above chart shows that the Tenkan line remains below the Kijun line after the weak bearish crossover had taken place. There are two points to be noted here:

  1. The bearish gap between the two lines is still strong and convincing.
  2. The price-action has broken the resistance of the Kijun line. Of course, not a decisive break but combined with the tail of the lates daily candle, it is giving a strong suggestion for further gains.

Let’s also have a look on the exponential moving averages for the currency pair:

GBP/CAD daily chart with 5, 22 and 55 day EMAs.

GBP/CAD has been in a strong uptrend after a sideways movement which spanned for a long time. The pair had been shy of 1.65oo and fearful of 1.5000 by remaining well over 1.5200. In fact the gap of 200 pips from the psychological support and the gap of merely 50 or so pips from 1.6500 was a strong suggestion of an upward break, which took place and the pair sky-rocketed to touch 1,8670.

Let’s see how GBP/CAD mpved during past 4 years:

The weekly chart of GBP/CAD showing how the pair jumped up after a long sideways price-action.

There is nothing to suggest that the trend has ended but such big moves need consolidations.

But are there any indications to suggest further consolidation?

Yes, there are. Let’s check the following weekly chart:

Weekly chart of GBPCAD showing that a double-top chart pattern has emerged.

The double-top chart pattern is not a perfect one, as shown in the above chart. However, it is there, when we are talking about a jump of 3426 pips from 1.5244 to 1.8760. The pattern had completed when the currency pair had broken below 1.8165 which represented the neckline.

What can be expected by GBP/CAD?

  • Resistance as indicated above.
  • Any break below 1.8100 should take GBP/CAD to 1.8020 first and then possibly 1.7960/1.7980.
  • In case 1.7958 support fails then the decline should extend towards 1.7868 to 1.7890.

The question will still remain if the consolidations, if take place, will be limited as indicated above? Well, no one can predict what happens tomorrow but the price-action analysis would say that, yes even deeper declines can not be ruled out. Lets check where even the first level of retracement (Fibonacci) i.e. 38.2% retracement lies. The following chart shows that.

Weekly chart showing the Fibonacci retracement levels for GBPCAD.

2 responses to GBP/CAD: The Canadian Dollar may weaken a bit before the Pound Sterling bows again

  1. Thank you Carol. This site was launched not as a business but as a passion and still remains that way. Wish to do much more though :). Thank you for being here and for the support.

  2. Himanshu, I just love how the Website has evolved, it’s much easier to read the journey of a given pair.
    I always read your analysis and find you explain yourself so well.
    I was reading your comments on the GBPCAD when the Funder mental News broke, Spiked up and took me out my Short trade, then proceeded to go in the direction I had planned. I really thought my Stop Loss was safe; still it is what it is.

    Be Happy