- GBP / CAD gnawing resistance around 1.7250
- With a technical image turning bullish on the charts
- British Pound is doing well as CAD eases in New Year’s trade
Image © Pound Sterling Live
The pound sterling exchange rate against the Canadian dollar was on track for a treble of gains in midweek trading and may have the potential to climb to September 2021 highs above 1.75 over the next several weeks, according to the latest technical analysis from Scotiabank.
The British pound rose against many currencies, including a weaker Canadian dollar during the opening week of the year, allowing the GBP / CAD pair to break through a further step at a barrier of resistance noticeable near 1.7250 on the charts.
GBP / CAD has already tried but failed to break above this level twice as its holiday rally fades in the last days of December, although technical analysis from Scotiabank suggests that the pound might be more successful on its last attempt.
“GBPCAD’s gains faded through the end of December, but the month overall delivered strong positive technical results for the pound, suggesting that the broader technical outlook is turning more positive,” Juan said. Manuel Herrera, strategist at Scotiabank.
“A clear rejection of the early December low on the weekly chart has turned into a bullish monthly signal (out of range). This should strengthen support on (relatively) minor short-term declines and help propel the GBP towards the 1.75 / 1.76 range (at least, as this represents the top of the wider side range in place the last year), ”Herrera and colleagues wrote in a briefing Tuesday.
Above: GBP / CAD displayed at daily intervals with late September Fibonacci retracements indicating possible areas of technical resistance with any rally.
- Reference rate at publication:
GBP to CAD spot: 1.7247
- High bank rates (indicative): 1.6643 – 1.6764
- Payment specialists prices (indicative: 1.7092 – 1.7161
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- Set up an exchange rate alert, here
GBP / CAD was on track for a third straight gain on Wednesday as the main GBP / USD exchange rate hit its highest level since early November during a period in which the Canadian loonie lost ground to the US dollar.
The GBP / CAD tends to closely mirror the relative performance of the USD / CAD and the main GBP / USD exchange rate, and often sees its largest movements when the USD / CAD and the GBP / USD travel within. same directions.
“Canada’s largest provinces are locking down, but other jurisdictions are not,” says Bipan Rai, head of foreign exchange strategy for North America at CIBC Capital Markets, noting that some Canadian provinces have reacted to the Omicron variant coronavirus more stringently than the government. In England.
“Initial spreads are the main arbiter of price action going forward, and we continue to see risks of underperforming the US, keeping the focus on USD / CAD higher. medium term. Expect the near-term range to be 1.26 to 1.29, ”Rai also said.
The Canadian dollar weakened in late December and early January and it could be the reintroduction of coronavirus-related restrictions on business activities in parts of the country that explains the underperformance.
Above: Local authorities subject to containment restrictions. Source: Canadian government.
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“Ontario’s renewed COVID restrictions may hold back the DAC to some extent, but pandemic news has swept the markets widely recently and we doubt that this is a major driver of DAC performance for the moment, “said Shaun Osborne, chief foreign exchange strategist at Scotiabank.
“We remain constructive on the outlook for the CAD, given the prospect of a fairly rapid tightening of the BoC this year. But we expect seasonal trends to keep CAD more defensive as the new year starts, ”Osborne also said.
Canada’s most populous province, Ontario, was the latest to announce some form of “lockdown” this week, though others, including Quebec, took similar action as early as Dec. 19 in response to the spread of the Omicron variant of the coronavirus.
The measures announced include the closure of bars, casinos, theaters and other performance venues as well as restrictions on the opening hours of hospitality premises like restaurants, all of which are automatic headwinds for economic recovery.
They could potentially justify the Bank of Canada (BoC) for sticking to its earlier forecast in December that suggested interest rates should not rise until the second quarter of 2022.
Parts of the market have bet in recent months that there is a chance that an interest rate hike will occur in January or March, but interruptions in the Canadian economic recovery would potentially make such results even less so. probable.
Above: USD / CAD displayed at daily intervals with the GBP / CAD rate.