GBP/CAD Sellers Eye September Lows as Oil Prices Support CAD

Market Overview

As oil prices fluctuate, the Canadian dollar (CAD) has gained support from buyers, benefiting from its close correlation with the commodity market. In contrast, the British pound (GBP) has been under pressure, with rising expectations that the Bank of England might adopt a more dovish stance in response to underwhelming recent economic data. This dynamic has caused the GBP/CAD pair to halt its two-week upward trend, and the pair now faces downward pressure, approaching the lows last seen on August 30. The Bank of England’s upcoming meeting could provide further insights into the potential path for interest rate cuts in the UK, which may play a crucial role in shaping the pair’s direction.

Technical Analysis

On the four-hour chart, GBP/CAD has broken through its third ascending trendline, forming a bearish fan pattern. Sellers have successfully pushed the pair below the moving averages, and price has dipped beneath the key support level at 1.77154. As a result, the market is now heading toward the immediate support level at 1.76855. Should this level break, the next targets for the pair will be 1.76404 and 1.76053, which are critical support levels that could halt further declines if buyers step in.

Oscillator Confirmations

RSI: RSI is in bearish territory, indicating increasing selling pressure.

MACD: The MACD histogram shows negative momentum, reinforcing the bearish sentiment.

Moving Averages: Both the 34-period and 100-period moving averages confirm the prevailing downtrend as price continues to trade below both levels.

Alternative Scenario

If buyers regain control, a reversal would require breaking through the broken trendline and overcoming resistance at 1.77575, which aligns with the previous trendline. A sustained move above this resistance would signal a shift in momentum, and the next upside target would be the resistance level at 1.78255. A breakout above this level could invalidate the bearish outlook and initiate a potential recovery.

Key Levels Overview

• Resistance Levels:
  • Resistance 3: 1.78255
  • Resistance 2: 1.77575
  • Resistance 1: 1.77154
  • Current Price: 1.76940
• Support Levels:
  • Support 1: 1.76855
  • Support 2: 1.76404
  • Support 3: 1.76053

Key Events to Watch

Two major events could drive GBP/CAD in the coming days. On Thursday, a speech by Bank of England member Sarah Breeden may provide fresh insights into the central bank’s stance, influencing GBP movements. Additionally, Friday’s inflation expectations report will be closely monitored, as it could offer a clearer view of the inflation outlook, which will directly impact the Bank of England’s monetary policy decisions.

Conclusion

GBP/CAD is currently under selling pressure, with sellers targeting the 1.76855 support level. Oscillators confirm the bearish outlook, suggesting a continuation toward 1.76404 and 1.76053. However, a reversal could occur if buyers push the price above 1.77575, invalidating the current downtrend. The Bank of England’s upcoming announcements, particularly on inflation expectations, will be key in determining the pair’s next move.

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