CFD Trading Rate Great Britain Pound vs Canadian Dollar (GBPCAD)

• GBP/CAD extends its correction to fresh lows following lower-than-expected UK inflation data. 
• The 1.7% rise in prices in September falls below the BoE’s 2.0% target. 
• It increases the probability the BoE will cut interest rates decreasing foreign capital inflows and demand for Sterling. 

GBP/CAD rolls over on Wednesday and declines almost half a percent to the mid 1.7900s. The fall is caused by the release of lower-than-expected inflation data from the UK – which showed headline inflation falling to 1.7% – as this put downside pressure on the Pound Sterling (GBP). 

Cooler inflation increases the likelihood that the Bank of England (BoE) will cut interest rates, and lower interest rates are negative for Sterling as they reduce foreign capital inflows. 

Before the release it was unclear whether the BoE would go ahead with an interest rate cut at their next meeting in November, mainly due to stubbornly high services inflation, however, Wednesday’s figures increase the odds the bank will go ahead with a 25 basis point (bps) (0.25%) rate cut. 

Wednesday’s data showed that both core and services sector inflation cooled in September, falling to 3.2% and 4.9% respectively. Core fell from 3.6% in August and was below the 3.4% expected; services fell from 5.5% in August, reaching its lowest level since May 2022. 

Bailey vindicated

Last week the Pound depreciated after the Governor of the BoE, Andrew Bailey said the bank should get more “activist” and “aggressive” about cutting interest rates which, at 5.0%, are one of the highest amongst western developed countries. 

Although the BoE’s Chief Economist Huw Pill calmed markets on the day after Bailey’s speech – saying the bank should still act with caution when it came to lower interest rates, September’s data suggests Bailey was accurate in his assessment. After all, headline inflation has now fallen well below the BoE’s 2.0% target. 

GBP/CAD Daily Chart

Downside for GBP/CAD may be limited, however, given similarly weak inflation data from Canada.  

Data out on Tuesday, for example, showed that the Canadian headline Consumer Price Index (CPI) declined to 1.6% annually in September, from 2.0% in August, and below estimates of 1.8%. This, in turn, suggests the Bank of Canada (BoC) will cut interest rates again (after three consecutive 25 bps cuts already) at its next meeting on October 23. 

The fall in Canadian inflation was mainly caused by a 10.7% decline in gasoline prices in September, and also affected related sectors such as transportation (down 1.5%). It marked the second month that headline inflation has fallen below the bank’s 2.0% target. Lower Crude Oil prices were responsible for the decline in gasoline prices. Oil also happens to be Canada’s largest export commodity. This, in turn, undermines the Canadian Dollar (CAD) and is a bullish factor for the GBP/CAD pair. 

Trump says he would rip up free trade agreement with neighbors

The Canadian Dollar could be facing headwinds after comments by former president Donald Trump, in which he said that he would pursue a radical “America First” if elected in November. 

In an interview with Bloomberg News, Trump said he would act to stop cheap Chinese cars from flooding the US market via carmakers nearshoring in Mexico as this was killing the US auto industry. Mexico has a free trade agreement with the US and Canada (USMCA), however, Trump suggested he would rip this up if he were made President. There is a risk Trump could also extend the trade war to the north and place heavy tariffs on Canadian goods, although the US does rely on Canadian Oil, suggesting it could be spared the same treatment as Mexico. 

Trump’s comments carried all the more bite because he is now the favorite to win the election according to betting websites. OddsChecker puts his chances at 58% to Vice-President Kamala Harris’s 42%. Trump is still lagging in the polls however, which show Harris leading with 48.5% versus Trump’s 46.1%, according to website FiveThirtyEight. 

• GBP/CAD rises back above an old trendline and extends its rally. 
• The pair extends its rally within a medium and long-term rising channel.

GBP/CAD looks like it has bottomed out and is once more rising within a broader rising channel. 

The pair was falling in a down leg, however, it has probably reversed and started a new uptrend. Given the principle that “the trend is your friend” the odds favor more upside to come. 

GBP/CAD 4-hour Chart 

Although the pair broke below an important trendline (“Trendline A” on chart) on October 3. It quickly bottomed out and has since recovered. Now it has also broken back above the same trendline, reversing the short-term downtrend in the process.

The Moving Average Convergence Divergence (MACD) indicator is now above the zero line adding further bullish evidence to the chart. 

GBP/CAD is further supported by the fact that it is in medium and longer-term uptrending cycles.

• GBP/CAD returns to the underside of a trendline it has broken below. 
• The pair is consolidating after falling within a rising channel. 

GBP/CAD is pulling back after unfolding a partial down-leg within a broader rising channel. It is probably in a short-term downtrend, which given the principle that “the trend is your friend” marginally favors more downside. 

The pair broke below an important trendline (“Trendline A” on chart) on October 3. It then bottomed out and has since recovered back up to the underside of the trendline. 

GBP/CAD 4-hour Chart 

GBP/CAD is at a critical turning point: it could either break back above the trendline, thereby reversing the trend, or roll over and continue lower. 

A break below the base of the consolidation (dashed line on chart) would indicate a continuation down leg. Such a move would be expected to reach an initial downside target at 1.7620 (Fibonacci 61.8% of the height of the range extrapolated lower), followed by about 1.7605 (September 4 lows). 

A decisive break back above the trendline, on the other hand, would suggest a reversal of the trend. This is possible given the medium and longer-term trends are bullish and the pair is in a rising channel. Further, the Moving Average Convergence Divergence (MACD) has crossed above its signal line and is rising steeply, indicating strong upside momentum accompanies the current move. 

In order to be decisive such a break would have to be accompanied by a long green candlestick that pierced well clear of the trendline and closed near its high, or three green candlesticks in a row that broke clearly above the trendline. 

• GBP/CAD has declined sharply within a rising channel. 
• The pair is likely to continue lower as the counter-trend reaction runs its course. 

GBP/CAD is unfolding a down leg within a rising channel. It will probably continue lower to at least the blue 100-day Simple Moving Average (SMA) at 1.7641. A break below the 1.7720 October 3 low would cement bearish bets. 

The pair is in a short-term downtrend and given the principle that “the trend is your friend” the odds favor a continuation of that trend. 

GBP/CAD Daily Chart 

Subsequent downside targets lie at 1.7603 (September 4 low) and 1.7407 (August 8 low). In the most bearish scenario price could fall to the lower channel line at 1.7375. 

That said, short-holders are advised to exercise caution as GBP/CAD is in an uptrend on the medium and long-term timeframes, as it oscillates higher within an ascending channel. There is a risk, therefore, of a reversal higher occurring unless the current sell-off marks the beginning of a deeper downtrend. This is possible given its steepness. 

The Moving Average Divergence Convergence (MACD) has crossed sharply below its signal line providing added bearish confirmation. 

The formation of a bearish Shooting Star Japanese candlestick reversal pattern on September 20 (orange rectangle on chart above) gave the first signs of weakness. It then consolidated for a while before starting to fall properly on October 1.

• GBP/CAD is undergoing a sharp decline within a rising channel. 
• It is likely to continue lower as the counter-trend reaction runs its course. 

GBP/CAD is unfolding a down leg within a rising channel. It will probably continue lower to at least the blue 100-day Simple Moving Average (SMA) at 1.7641. 

The pair is in a short-term downtrend and given the principle that “the trend is your friend” the odds favor a continuation of that trend. 

GBP/CAD Daily Chart 

Subsequent downside targets lie at 1.7603 (September 4 low) and 1.7407 (August 8 low). In the most bearish scenario price could fall to the lower channel line at 1.7375. 

GBP/CAD is in an uptrend on the medium and long-term timeframes, as it oscillates higher within an ascending channel. There is a risk, therefore, of a reversal higher occurring unless the current sell-off marks the beginning of a deeper downtrend. This is possible given its steepness. 

The Moving Average Divergence Convergence (MACD) has crossed below its signal line providing added evidence that prices are going to push lower. 

The first signs of weakness came when the pair tested the upper channel line and formed a bearish Shooting Star Japanese candlestick reversal pattern on September 20 (orange rectangle on chart above). It then consolidated for a while before starting to fall properly on Tuesday.

• GBP/CAD may be beginning a bearish phase after touching the top of its channel and reversing lower. 
• It is showing bearish divergence with momentum. 

GBP/CAD might have reversed its short-term uptrend after testing the top of its rising channel, forming a bearish reversal candlestick pattern (orange rectangle on chart below) and then establishing a sequence of lower lows and lower highs. 

GBP/CAD 4-hour Chart 

Although GBP/CAD has pulled back over recent periods, it has probably reversed trend and a break below 1.7946 (September 25 low) would confirm more downside. Downside targets lie at 1.7754 (September 17 low and 50-day SMA), 1.7694 (September 16 low) and 1.7603 (September 4 low) and 1.7407 (August 8 low). A break below 1.7907 would provide stronger confirmation. 

Although GBP/CAD is in an uptrend on all time frames, it is nevertheless oscillating within an ascending channel. It is possible, therefore, that it may be entering one of its counter-trend bear phases. 

The Relative Strength Index (RSI) has formed a bearish divergence with price compared to the September 17 low (red dashed line on chart above). Although the price was much lower on September 17 momentum was not. This suggests underlying weakness could push prices down. 

A break above the high of the Shooting Star at 1.8245 would confirm a resumption of the uptrend. If so, the next target lies at 1.8278, the 61.8% extrapolation of the prior move higher. 

Any further bullishness beyond the confines of the channel is likely to be short-lived, however. Such moves are signs of “exhaustion” and are a precursor to deeper corrections on the horizon.

• GBP/CAD is showing signs that it may be about to reverse lower. 
• The pair formed a bearish candlestick pattern and has since declined.

GBP/CAD is threatening to reverse its uptrend after testing the upper channel line of its long-term rising channel and forming a bearish reversal candlestick pattern (orange rectangle on chart below). 

GBP/CAD 4-hour Chart 

GBP/CAD formed a bearish Shooting Star Japanese candlestick pattern on both the Daily and 4-hour charts on September 20 after a false break above the upper channel line. The subsequent weakness suggests this candlestick may mark a top of the pair.

Although GBP/CAD is in a strong uptrend on all time frames, it is rising and falling within a channel and there is a growing chance the pair may be entering one of its counter-trend bear phases. 

A break below 1.7949 (September 19 low) might confirm a reversal of the short-term trend and lower prices to come. A break below 1.7907 would provide stronger confirmation. Downside targets lie at 1.7754 (September 17 low and 50-day SMA), 1.7694 (September 16 low) and 1.7603 (September 4 low) and 1.7407 (August 8 low).  

The Relative Strength Index (RSI) is also forming a bearish divergence with price compared to the September 17 low (red dashed line on chart above). Although the price was much lower on September 17 momentum was not, rather it is lower now. This suggests underlying weakness could push prices down. 

A break above the high of the Shooting Star at 1.8245 would probably confirm that price is going even higher. If so, it might reach a target at 1.8278, the 61.8% extrapolation of the prior move higher. 

Any further bullishness beyond the confines of the channel is likely to be short-lived, however. Such moves are signs of “exhaustion” and are a precursor to deeper corrections on the horizon.

• GBP/CAD has formed a bearish candlestick pattern after briefly breaking above a channel line. 
• This could be a sign a pullback is about to unfold, however, downside pressure has been limited so far. 

GBP/CAD has temporarily broken above the upper channel line of a long-term rising channel before falling back down and closing (on Friday) near where it opened. 

The pattern thus formed is a Japanese Shooting Star candlestick (orange rectangle on chart below) which is a short-term bearish sign, especially if followed up by a bearish down day, as seems to be the case (so far) on Monday. 

GBP/CAD Daily Chart 

That said, GBP/CAD is in an uptrend on all three major time frames – the short, medium and long-term. This suggests that overall the “current” is flowing north. Given it is a principle of technical analysis that “the trend is your friend” this would suggest the odds continue to favor more upside.

However, GBP/CAD is also showing bearish divergence with the Moving Average Convergence Divergence (MACD) momentum indicator (red dashed lines). Although the price has risen to a much higher peak compared to July 12, the MACD is actually lower. This is a bearish sign and suggests a higher chance of a pull back evolving. Given the strong overarching uptrend, however, the pullback might just be a temporary sell-off.

If there is a correction, however, it might reach the 50-day Simple Moving Average (SMA) at 1.7753. 

Alternatively, a break above the high of the Shooting Star at 1.8245 would probably confirm that price is going even higher. If so, it might reach a target at 1.8278, the 61.8% extrapolation of the prior move higher. 

Any further bullishness beyond the confines of the channel is likely to be short-lived. Such moves often signal “exhaustion” and are a precursor to deeper corrections on the horizon.

• GBP/CAD has rallied up to resistance at the upper channel line of a rising channel. 
• It is at an important crossroads. The uptrend holds but price is diverging bearishly with MACD.

GBP/CAD has rallied up to a new high for 2024 and reached the top trendline of a long-term rising channel. Although it is in a strong uptrend the top of the channel is likely to exert tough resistance and there is a risk of a pullback and countertrend correction unfolding. The pair has reached a critical level. 

GBP/CAD Daily Chart 

GBP/CAD is showing bearish divergence with the Moving Average Convergence Divergence (MACD) momentum indicator (red dashed lines). Although price has risen to a higher high compared to July 12, the MACD is actually lower than the level it was at on July 12. This is a bearish sign and suggests a higher chance of a pull back evolving. 

An initial target for such a pull back might be the 50-day Simple Moving Average (SMA) at 1.7753. 

That said, price itself has not formed any kind of reversal pattern yet. It is also in an uptrend on all three major time frames – the short, medium and long-term. This suggests that overall the current is flowing north. Given it is a principle of technical analysis that “the trend is your friend” the odds favor more upside.

Given the resistance above, however, price would have to decisively break above the upper channel line to confirm a continuation. 

A decisive break would be one accompanied by a long green candlestick that closed near its high well above the channel line, or three green candlesticks in a row that close well above the trendline. A close above the 1.8091 yearly high would confirm such a breakout, for example. 

Such a breakout might reach a target at 1.8278 the 61.8% extrapolation of the prior move higher. 

• GBP/CAD is closing in on the upper channel line of a rising channel. 
• It is likely to meet firm resistance at the line and price is diverging bearishly with MACD.

GBP/CAD is trending higher in a rising channel, however, it is close to touching the upper trendline of the channel where it is likely to meet firm resistance and will probably pull back down as a consequence. 

GBP/CAD Daily Chart 

GBP/CAD is showing bearish divergence with the Moving Average Convergence Divergence (MACD) momentum indicator (red dashed lines). This means that although price has risen to a higher high compared to the July 12 high, MACD is actually lower than where it was on July 12. This is a bearish sign and suggests a higher chance of a pull back evolving. 

Taken together with the looming overhead channel line it indicates a risk of price correcting back down within the channel. An initial target for a pull back would be the 50-day Simple Moving Average (SMA) at 1.7733. 

Price itself has not formed a reversal pattern yet. If it does form a candlestick reversal pattern such as a Shooting Star, Bearish Engulfing or Hanging Man, for example, then that will be even more evidence of a correction unfolding.