GBP/CAD's rally from 1.5655 reaches three-month highs above 1.5800

• The pound bounces up on Friday to retest the 1.5800 support area.
• Lower oil prices and a dovish BoC have hit the CAD.
• GBP/CAD: Above 1.5800, the pair eyes 1.6000 area.

The British pound has performed a surprising comeback against the Canadian dollar on Friday, bouncing up from the 1.5655 area to reverse Thursday’s decline and explore levels past 1.5800 for the first time since late June.

The CAD remains under pressure after BoC’s dovish hike

The Bank of Canada surprised the markets on Wednesday, hiking rates by "only" 50 basis points, against expectations of a 0.75% move. Furthermore, the bank's statement signaled the end of the tightening path on the back of the gloomy global economic prospects, which sent the Canadian dollar lower across the board.

Beyond that, the sluggish performance of crude prices, Canada’s main export, has increased pressure on the loonie. The US benchmark WTI oil is trading about 0.5% lower on the day, nearing $88.00 after having peaked at $89.70 on Thursday.

In the UK, the appointment of Rishi Sunak as the UK’s Prime Minister has kept the GBP moderately bid over the past few days. The pledge to restore economic stability at his first speech has calmed investors, spooked as they were by his predecessor’s economic plan.

GBP/CAD: Above 1.5800, the pair might reach the 1.60 area

A confirmation above 0.5800 is likely to strengthen the bullish bias and push the pair toward 1.5970 (the 200-day SMA) ahead of the 1.6000 psychological level and June’s peak.

The pair, however, might take a breather after a nearly 400-pip rally this week. Immediate support lies at 1.5645 (October 27 low) and then, the 100-day SMA at 1.5435. A reversal below this level would cancel the positive bias and open the path toward October 21 low at 1.5315.

Technical levels to watch