GBP/CAD Buyers Gain Momentum as Canadian Economic Growth Falters

Market Overview

On Friday, 29th November 2024, the Canadian dollar found itself under renewed pressure, primarily driven by weak economic data and a decline in oil prices. Canada’s monthly GDP growth has slowed, and oil, a critical component for the Canadian economy, has experienced a significant drop, further weakening the loonie. Conversely, in the United Kingdom, an increase in mortgage lending indicates sustained strength in the housing market, providing fresh support for the British pound. Consequently, buyers of GBP/CAD have seized new opportunities to extend the upward trend that began on November 22nd.

Technical Analysis

On the two-hour chart, GBP/CAD faces a critical resistance level at the previous high of 1.78052. This level is pivotal for buyers attempting to maintain the current bullish trajectory. If the price manages to break above this key resistance, it will pave the way for further gains towards subsequent resistance levels at 1.78295, 1.78604, and ultimately 1.78946.

Failure to break this resistance could see a pullback, with immediate support levels at 1.77710 and 1.77158 poised to contain potential downside moves. These supports are crucial for preventing deeper correction and maintaining bullish sentiment in the short term.

Momentum indicators also provide insight into the current sentiment. The RSI remains above 50, indicating buying momentum, though it is not yet in overbought territory, suggesting there is room for further gains. Meanwhile, the MACD is showing a neutral stance, with the signal line yet to diverge strongly, pointing towards an uncertain but cautiously optimistic outlook. Moving averages are aligned in a bullish manner, with the shorter-term moving averages above longer-term ones, providing further confirmation of the upward bias.

Key Levels

• Resistance Levels:
  • 1.78946 (Upper Target)
  • 1.78604
  • 1.78295
  • 1.78052 (Critical Resistance)
• Support Levels:
  • 1.77710 (Immediate Support)
  • 1.77158 (Lower Support)

Key Events to Watch

With U.S. markets closed for the Thanksgiving holiday, trading volume in the North American session is expected to be lower than usual. This reduced activity may limit major directional movements for GBP/CAD. The only significant data release left for Canada this week is the annual budget balance for September, which is unlikely to dramatically impact market sentiment.

Looking ahead, the UK is scheduled to release its housing market inflation report early next week. Given the current strength in mortgage lending, an increase in housing prices could lend additional support to the pound, providing further impetus for GBP/CAD buyers to push the pair higher.

Conclusion

GBP/CAD remains poised to continue its upward movement if it can overcome the critical resistance at 1.78052. A successful breakout will target higher resistance levels, while failure to break could lead to a retracement towards nearby supports.