Scotiabank Bullish on Pound vs Canadian Dollar Outlook

Pound Sterling remains positively aligned against the Canadian Dollar - here are the levels that matter.

More gains are likely for GBP/CAD as price action indicates a positive new uptrend may be emerging.

The strong long green up bars posted by recent price action and the occurrence of two bullish Japanese candlestick patterns in close proximity to one another, as denoted by the two blue dots marked “P” on the chart, over the last few sessions, has increased the number of signals denoting a bullish bias.

The MACD indicator, which measures trend momentum, has now passed above its zero line denoting a higher probability that the overall trend has changed from down to up.

The 100-day moving average provides a strong resistance level capping upside progress. upside progress but once the pair clears it – potentially by moving above the 1.7117 highs - further gains are likely, with the next target near the upper trend channel at 1.7400.

But once the pair clears it – potentially by moving above the 1.7117 highs - further gains are likely, with the next target near the upper trend channel at 1.7400.

Expectations for a stronger GBP will be welcomed by those with impending GBP into CAD payments as they have seen their buying power steadily decline through 2016.

At present, a 1.6799 GBP/CAD offers a range of retail transfer rates lying between 1.6211 and 1.6648 depending on how competitive the provider is.

Scotiabank are Bulls

The pair has pulled back to a level where it is hovering just above the trend-line for the move up from the October lows.

In the event of a break below the trend-line at 1.6600, the outlook would turn decidedly more bearish, however, in the absence of a trend-line break the outlook remains bullish.

Scotiabank’s Sean Osborne, who regularly gives technical updates on CAD pairs, also sees the possibility of a move higher:

"GBPCAD’s recent, modest decline is also showing signs of deceleration and positive divergence with a near-term consolidation around the 50 day MA (1.6707). The move is threatening the ascending trend line off the October-November lows and we highlight the potential for support delivering near-term upside.

“We remain GBPCAD bulls above 1.64 and note the potential for medium-term gains toward mid-September highs around 1.75, said Osborne.

USD/CAD Leads the Way, But Strength Becoming Exaggerated

It will be hard for the Canadian Dollar to find any meaningful strength as long as the headline USD/CAD rate continues to climb.

USDCAD managed to rally through mid-week trade and re-test 1.3500 after finding support in the 1.3420/40 area.

However there are suggestions that the US Dollar's rally is due for a pause following the US Dollar Index's achievement of a 14 year high this week.

"We have advocated a buy on dips stance, but with the broad USD (on a DXY basis) reaching multi-month highs (and forming a triple top), we think it may take some time before USDCAD makes another test of 1.3570/1.3600," say analysts at TD Securities in a client brief.

Dollar direction will be informed further by the main event of the day, - Janet Yellen makes her first public appearance since the US election.

"With chances of a rate hike now at 94% for December, there is a risk that the Fed’s leader could spark a bout of Dollar weakness if she so much as hints at the possibility that the central bank won’t move in December. Thus currencies like the Yen and the Euro, which have fallen hard over the past few days against the US dollar, could be due a decent bounce," says Chris Beauchamp at IG in London.