GBP/CAD traded lower yesterday, breaking below the 1.7015 barrier. It then traded in a consolidative manner, staying between that barrier and the support of 1.6968, which acted as a temporary floor between January 21st and 27th. Overall, the rate has been trading in a steep downtrend mode, marked by the downside line drawn from the peak of February 23rd, and thus, we will consider the short-term outlook to be negative.
A clear and decisive dip below 1.6968 would confirm a forthcoming lower low on the 4-hour chart and may encourage the bears to dive towards the 1.6900 zone, marked by the low of December 14th. If they are not willing to stop there, then a break lower could set the stage for more declines, perhaps towards the low of December 13th, at 1.6835.
Shifting attention to our short-term oscillators, we see that the RSI has just touched its toe below its 30 line, while the MACD remains below both its zero and trigger lines. Although the slope of both indicators has flattened somewhat, they both detect strong downside speed, which supports the notion for further declines.
We will start examining a possible bullish reversal upon a break above 1.7100, defined as a resistance by yesterday’s high. This will not only confirm the break above the aforementioned downside line, but also a forthcoming higher high on the 4-hour chart. The bulls may then get encouraged to climb towards the 1.7175 hurdle, marked by Friday’s high, where another break could allow advances towards the 1.7235 zone, marked by the inside swing lows of February 22nd and 23rd.
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