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GBPCAD extended gains by +0.11% early European session after pairing Tuesday losses. The GBPCAD upside gains are underpinned by Tuesday’s downbeat UK PMI data which reignited fears of an economic recession amid BoE echoing further rate hikes. BoE member Pill pointed out a cautionary stance against over-tightening on diminishing economic growth.
The Canadian Dollar remains resilient as energy prices are trading at critical levels. There will be a release of the Canadian Core retail sales MoM for March later on Thursday. They will be critical in shaping the BoC interest rate meeting on June 1, where investors are pricing in a 75bps hike to 1.75%.
Traders shift their focus to the BoE MPC member Tenreyro’s speech later in the New York session.
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The GBPCAD extended gains for the second week as bulls defended the 1.58000 level, coinciding with 9-year support. The pair is due for a correction as the RSI indicator reading slowly moves outside the oversold zone. However, Upside gains are capped by an immediate resistance at 1.6105 coinciding with William’s alligator dynamic resistance.
The outlook for the pair is currently bearish, although a break above the 1.6105 may soon see bulls attempting an extended move towards the 1.65500 area, a 50% retracement of the previous drop. Bears may need to defend the 1.65500 area to experience further downside towards the 1.5800 support.
The ActivTrader Sentiment tool shows that 90% of retail traders are currently bullish on the GBPCAD. This reading is extremely bullish as they attempt to defend the 1.5800 near-term support.
A drop in energy prices may underpin Canadian currency strength in the near term giving a rally in GBPCAD. However, the possibility of lifting restrictions on lockdowns in Beijing may soon see commodity demand resuming in the near term.
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The GBPCAD has experienced modest gains as bulls attempt to challenge the 1.6105 near-term high. The pair left a double bottom at 1.5800 support and can trade higher towards the 1.63000 psychological figure.
However, the 1.6105 will remain an immediate pivot for the trend as it coincides with a 200-day moving average. A failure to break above that area may see bears reclaiming the bearish outlook towards the 1.6000 big figure and 1.5800 level.
The MACD indicator shows volume bars are still neutral slightly below zero, although the moving averages have crossed into a bullish region. Traders should pay close attention to the Price action around the 1.6105 area for solid direction in the near term.
