The GBPCAD pair reached the demand zone five times in the past 1.5 years and then bounced off it, forming several months of uptrends reaching 600-1000p.
- demand zone under selling pressure – bull market engulfing
- oil prices support the Canadian dollar
- market expects higher interest rates in the UK
The last daily candle of the past week formed a bullish outside bar on the mentioned demand zone. A minimum appeared on the MACD oscillator and the indicator entered the upward phase.
Analyzing the pair from the fundamental point of view, i.e. the current situation on the commodity market, and in particular the rising prices of oil (accounting for 16% of Canada’s total exports) – everything would point to a further strengthening of the Canadian dollar.
On the other hand, the market is expecting a tightening of monetary policy in the UK and a possible interest rate hike at the BoE meeting on November 4, which could strengthen the pound against other currencies. Which factor will prevail? Who knows. So let’s go back to the technical analysis, maybe here we will find the answer.
On the H4 chart an upward divergence continues. However, we cannot predict the pair’s direction until the price breaks out of the outside bar range. If the breakout occurs and the MACD is still upward – demand will target the nearest supply zone at 1.7140. However, if the breakout occurs at the bottom – the range of decline may prove to be more significant, and the target will be the minimums of 2020 located 100p below.
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