Strong bearish signals for GBP/CAD

Source: Dukascopy Bank SA
GBP/CAD opened its long-term bearish path in the beginning of 2016, after conquering seven-year highs the month before. The pair posted a 21 percent loss on the plunge in August, developing a strong descending channel on the way, which we expect to continue to restrict the pair's movements. What strengthens this scenario is the multitude of different time-frame patterns which all as one point in the direction of the strong long-term support at 1.5452. One of these patterns is a junior descending channel that has been formed inside of the senior pattern on the pair's way towards its upper trend-line. The junior pattern can be observed in the daily chart as opposed to the senior one that is sketched in the weekly time-frame. A descending triangle pattern adds to the claim that the sell-off is going to continue, distinguishing a significant support level at 1.7185 which the rate will have to break in order to fulfil our expectations.  

Weekly Chart:
© Dukascopy Bank SA


Based on the 4-hour chart, a dip below the 1.7185 support will cause the rate to dive towards the 200-period SMA which will be executed over the following sessions, setting 1.7059 (100-period SMA) as its next target. With the ultimate target being 1.6549, the junior channel bottom trend-line, the rate will encounter several intermediate resistances on its way. 

Daily Chart:
© Dukascopy Bank SA


Upside restrictions can be defeated

On the other hand, a short-term bullish development seems quite likely as well, as the 55-period and 200-period SMA crossover has just given a strong BUY signal, and a development of this kind would require at least a surge towards, but possibly a break out of the 1.7248 level with other strong supply areas at 1.7370 and 1.7643 respectively.  

Additionally, if the price closes above the 1.7476 resistance mark, DBP/CAD will confirm a double bottom pattern, suggesting that a bullish outburst might indeed come.  

Hourly Chart:
© Dukascopy Bank SA


More volatility ahead

Monthly Manufacturing Production caused disappointment amongst market participants, leading to a negative surprise reaction, which again confirmed the 1.7185 support by cutting losses right then and there. More volatility can be definitely expected over Wednesday's trading session, as a set of significant Canadian data, including the BOC rate statement, comes out at 2 PM GMT. Experts expect no change in the Canadian Overnight rate and any number other than the usual 0.5% could cause panic in the markets.

Aggregate Technical Indicators:
© Dukascopy Bank SA

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