GBP/CAD Buyers Eye Breakout as Sentiment Improves on UK Data

06/05/2025

Market Overview

Sterling found renewed support on Tuesday following stronger-than-expected PMI readings from the UK services and composite sectors. Although the figures remain below the 50 threshold that separates expansion from contraction, the improvement suggests a moderating slowdown. This has reignited market optimism surrounding the British economy and provided a tailwind for GBP against commodity-linked currencies, particularly the Canadian dollar. Meanwhile, sentiment around the loonie remains fragile as markets brace for weaker trade balance data and a slight dip in Canada’s Ivey PMI.

Technical Analysis

On the 1-hour chart, GBP/CAD continues to consolidate within a well-defined range, fluctuating between the upper boundary at 1.84282 and support near 1.82936. The pair is currently testing resistance at 1.84282, with bullish momentum gaining traction. A decisive breakout above this level would confirm the end of consolidation and open the path towards higher resistance zones at 1.84648, followed by 1.85114 and 1.85628.

Momentum oscillators reinforce the bullish outlook. RSI remains above 50 and slopes upward, indicating sustained buying interest. Similarly, the MACD histogram is building above the zero line, confirming upside pressure. However, if buyers fail to maintain control, the market may slip back towards immediate support at 1.83768. A deeper pullback below 1.82936 would invalidate the current bullish scenario and may reintroduce downside risks.

Key Technical Levels

Resistances: 1.84282, 1.84648, 1.85114, 1.85628

Supports: 1.83768, 1.82936

Fundamental Drivers

The Canadian dollar remains vulnerable ahead of today’s Ivey PMI and trade balance data. While the Ivey PMI is expected to post a marginal decline from 51.3 to 51.2, the figure remains above the neutral level, implying stable economic conditions. However, concerns surrounding a widening trade deficit—driven by weakening exports—pose additional downside pressure on the loonie. Should actual figures underperform expectations, markets may further reduce exposure to the Canadian dollar, thereby offering fresh support for GBP/CAD.