GBP/CAD: Buyers Push to Sustain the Uptrend
Market Overview
On Monday, December 2nd, 2024, the GBP/CAD pair experienced a notable surge in buying momentum, underpinned by a combination of fundamental and technical factors. The recently released UK housing market’s monthly and annual inflation data exceeded market forecasts, indicating a stronger-than-anticipated rise in house prices. Elevated inflationary pressures could potentially compel the Bank of England (BoE) to adopt a more cautious stance regarding future interest rate reductions, thus lending support to the pound. Concurrently, the Canadian dollar remains under pressure from declining crude oil prices, which serves to amplify the upside potential for GBP/CAD. Given oil’s pivotal role in Canada’s export-driven economy, any sustained weakness in crude prices tends to exert considerable downward pressure on the CAD.
Technical Analysis
The GBP/CAD pair is currently demonstrating a clear uptrend, characterized by a consistent pattern of higher highs and higher lows on the four-hour chart. Following an initial failed attempt to maintain a position above the significant resistance level at 1.78052, buyers are now making another concerted effort to regain control of the market. If they succeed in breaking and sustaining above this resistance level, further gains are anticipated towards the immediate targets of 1.78295 and 1.78422, with a subsequent move potentially extending to 1.78604, contingent upon continued buying strength.
Alternatively, should the buyers fail to secure a decisive position above 1.78052, it is likely that sellers will attempt to test the immediate support level at 1.77710, which aligns with key moving average overlaps. A breach of this support zone would alter the outlook to a more bearish scenario, with the next key support level situated at 1.77158.
Key Levels
- Resistance Levels: 1.78052, 1.78295, 1.78422, 1.78604
- Support Levels: 1.77710, 1.77158
Key Events to Watch
Later today, market participants will closely scrutinize the release of the Purchasing Managers’ Index (PMI) data from both the UK and Canada. The outcome of these reports could introduce significant volatility to the GBP/CAD pair, depending on the extent to which the data diverges from market expectations.
Conclusion
The GBP/CAD pair remains well-positioned to extend its upward momentum if buyers can achieve a decisive breakout above the resistance level at 1.78052. Failure to do so could lead to a pullback towards key support levels, potentially paving the way for a shift towards a bearish outlook.
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