GBP/CAD Targets Decline as Price Breaks Below Kumo Cloud

Market Overview

Currently, the GBP/CAD currency pair is experiencing increased selling pressure in the daily timeframe. This bearish momentum stems from several factors, including weak economic data from the UK and the strengthening of the Canadian dollar driven by rising crude oil demand and improving economic indicators in Canada. The British pound is facing challenges against the Canadian dollar, primarily due to concerns surrounding UK economic growth and rising unemployment rates, leading to a weaker sterling.

Technical Analysis

Double Top Formation and Support Breakdown

 GBP/CAD has formed a double top pattern on the daily chart following an uptrend, signaling a potential trend reversal due to waning bullish momentum. The pair has broken below its prior bottom, moving past the key 127.2% Fibonacci support level at 1.77825. Currently, the price is descending towards the 161.8% Fibonacci level at 1.76824, which coincides with the neckline of the double top pattern and serves as a critical support area.

Kumo Cloud Break and Ichimoku Analysis

 The price has also broken below the Kumo cloud, indicating a shift to bearish conditions and reduced buying power. At present, the price remains below the cloud, further confirming the bearish trend. Additionally, the Tenkan-sen (red line) has crossed below the Kijun-sen (blue line), signaling continued downward momentum. The Chikou span is also below the current price, supporting the bearish sentiment.

If the price breaks the 161.8% Fibonacci level at 1.76824, subsequent support levels are at 1.75720 (200.0% Fibonacci) and 1.74523 (241.4% Fibonacci). Each of these levels can act as key points to assess the strength of the sellers and serve as strategic entry points for potential trade decisions.

Alternative Scenario

If the price fails to breach the 161.8% Fibonacci support and retraces upwards, it could target the resistance levels at 1.78611 (0.0% Fibonacci) and 1.79715 (61.8% Fibonacci). A decisive move above these resistance levels would signal a potential trend reversal, with the market attempting to return to a bullish phase.

Oscillators and Trend Indicators

The RSI is currently at 35.23, indicating bearish momentum and suggesting that the market is approaching oversold territory. This may hint at a short-term rebound, though bearish pressure remains dominant. Furthermore, the MACD is in negative territory and has crossed below its signal line, highlighting increasing selling pressure and reinforcing the downward trend. These indicators collectively suggest a likely continuation of the current downtrend unless key support levels are breached.

Key Technical Levels Overview

Resistance Levels:

• Resistance 1: 1.77825
• Resistance 2: 1.78611
• Resistance 3: 1.79715
• Resistance 4: 1.81502

Current Price: 1.77190

Support Levels:

• Support 1: 1.76824
• Support 2: 1.75720
• Support 3: 1.74523

Fundamental Outlook

Several upcoming data releases could influence the current GBP/CAD downtrend. Key events include the UK preliminary Q3 GDP and business investment figures, set for release on Friday. Monthly GDP growth is expected to remain steady at 0.2%, while quarterly growth is forecasted to decrease from 0.5% to 0.2%, which could continue to weigh on the pound. Additionally, industrial and manufacturing production data will be in focus, with the industrial output expected to show no growth versus last month’s 1.1% gain—adding further pressure to the pound.

In Canada, Friday’s releases include manufacturing sales and wholesale sales. Manufacturing sales are forecasted to decline by 0.7%, but an increase of 1.0% in wholesale sales could strengthen the CAD. The expected improvement in Canadian sales metrics could lend support to the CAD and further pressurize GBP/CAD’s downward trajectory.

Conclusion

The GBP/CAD remains bearish as it targets support levels, with sellers dominating. Economic data for the UK and Canada will likely influence the pair’s movement in the coming days, keeping pressure on GBP/CAD unless unexpected data shifts the balance.