GBP/CAD wavers around 1.5600 after failure to break beyond 1.5700

• The pound treads water at 1.5600 after rejection at 1.5700.
• The GBP loses momentum on Tuesday.
• Lower oil prices have weighed on the Canadian Dollar's demand.

The pound has been trading back and forth, both sides of 1.5600 on Tuesday, after Monday’s rejection from the 2, 1/2-month highs at 1.5700. The pair, however, remains steady above 1.5500 after having bounced from 1.5100 last week.

Sterling loses traction on Tuesday

The cable lost momentum on Tuesday following a sharp rally on Monday after the new UK finance minister, Jeremy Hunt announced that he will scrap most of the aspects of the tax cuts plan presented by his predecessor last month. The British Government’s U-turn has dampened hopes of an aggressive rate hike by the Bank of England, which has undermined GBP’s upside momentum.

Furthermore, the pound saw some positive price action after the Financial Times suggested earlier today that the Bank of England might be considering delaying the start of its quantitative tightening (QT). The report was denied by the bank later on, which sent the GBP lower again.

On the other end, the lower oil prices have kept CAD bulls subdued. WTI oil plunged 4% on Tuesday, weighed by global recession fears and increased selling pressure on the commodity-linked loonie.

GBP/CAD: capped below resistance at 1.5625

From a technical perspective, the pair’s recovery is facing resistance at 1.5625 (October 13, and 14 highs) which is closing the path toward the October 17 high at 1.5705. Above here, the next target would be the August 2 high at 1.5770.

On the downside the pair remains contained above 1.5500 (session low) with a next potential support area at the 100-day SMA, currently around 1.5445 ahead of the 50-day SMA at 1.5260.

Technical levels to watch