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GBP/CAD Might Be Set for 1.6724

May 28, 2020 at 7:20 by Dorin Rosu

The Great Britain pound versus the Canadian dollar currency pair seems to be under bearish command. Do the bulls have any chance of getting into the scene in the near future?

Long-term perspective

The ascending trend that started from the 1.6725 low, after the 1.6724 level was confirmed as support, culminated at the 1.8051 high and, even after the bulls recovered from the 1.6542 low, ended following the market participants lost of confidence, as it is showed by the piercing of the double support etched by the ascending trendline that starts from 1.6725 and the 1.7132 level.

After slipping under the double support, the price found support at the intermediary level of 1.6988. But this was not a bullish opportunity to turn things around. It was only a relatively short-lived consolidation phase limited by 1.7132 and 1.6988 that played its part and, as a result, brought the price to the next intermediary level, 1.6868.

In the current context, one plausible scenario is the one in which the price rebounds from 1.6868. Such a movement could be limited by the 1.6988 level. If the price reaches 1.6988, then the market may be in for another round of range trading, obviously limited by 1.6988 as resistance and 1.6868 as support. However, reaching the 1.6988 level also opens the door to 1.7132.

Another possibility is to see the continuation of the current downward swing. This can come after a compressed consolidation pattern, such as a flag or pennant, or after 1.6868 is pierced and confirmed as resistance. Thus, the bears will have freehand to dive the price to the key 1.6724 support level.

Short-term perspective

The descending trend that started after the 1.7626 level was confirmed ended at 1.6965, allowing a range trading phase to develop. But as this phase managed only to draw two false piercings of the 1.7094 intermediary level, 1.7123 and 1.7113, the bears felt entitled to send the price to even lower values, hence invalidating the support and touching the 1.6842 level — also an intermediary one.

So, even if the trend ended, the overall movement remained pointed towards the south.

If the bulls are not able to push the price higher, with or without the false piercing of 1.6842, then the bears are likely to shift it to 1.6698. On the other hand, if the bulls succeed, then they will get another chance to conquer 1.7094. If they do, the 1.7244 level is their main target.

Levels to keep an eye on:

D1: 1.6868 1.6988 1.7132 1.6724
H4: 1.6842 1.6698 1.7094 1.7244

If you have any questions, comments, or opinions regarding the Technical Analysis, feel free to post them using the commentary form below.

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