GBP/CAD reclaims the 1.7200 figure as oil-prices fall amid a risk-on market mood

• On Tuesday, the GBP/CAD climbs 0.40% as WTI fall below $90.00.
• Central bank divergence between the BoE and BoC bolstered the GBP, as rates increased in the UK.
• GBP/CAD is neutral subject to a breakout either way; caution is warranted.

The GBP/CAD pares some of its Monday’s losses during the North American session, climbing 0.39%. At the time of writing, the GBP/CAD is trading at 1.7208. The British pound recovered some ground vs. the Canadian dollar, courtesy of lower oil prices which weighed on the latter, as US crude oil benchmark WTI slid under the $90.00 per barrel.

Risk-on market mood, keep the British pound in the right, foot alongside some risk-sensitive currencies like the antipodeans and the Canadian dollar. However, the Loonie was hurt by oil prices, while the GBP got a lift-up on the last week, as the Bank of England hiked rates by 25 basis points.

The GBP/CAD narrative lies on the central bank divergence. In the last two meetings, the Bank of England hiked 40 bps and left bank rates at 0.50%. Meanwhile, on its last monetary policy, the Bank of Canada (BoC) chose to keep rates unchanged, even though STIR markets priced in an 80% chance of increasing rates from 0.25% to 0.50%.

Therefore, the GBP/CAD is upward biased, but in the last two days have witnessed a fall from weekly highs, weighed by political issues in the UK that looms the possible resignation of British Prime Minister Boris Johnson.

GBP/CAD Price Forecast: Technical outlook

That said, the GBP/CAD seesawed in the week, between the 1.7130-1.7260 range. On Tuesday, the pair bounced off the weekly lows as the GBP/CAD slide stalled at the 200-day moving average (DMA) at 1.7145.

The GBP/CAD is neutral biased, subject towards a breakout upwards or downwards. However, on the downside lie the 100 and the 50-DMA around 1.7081 and 1.7038, which would be difficult to overcome if crude oil prices keep headed south.

Upwards, the GBP/CAD resistance levels ahead are February 7 daily high at 1.7274, followed by 1.7308. On the flip side, the 1.7200 figure is the first support, which, once broken, would expose the 200-DMA at 1,7145, followed by 1.7100.