Here’s a classic break-and-retest scenario unfolding on the 4-hour time frame of GBP/CAD.
The currency pair is closing in on this confluence of levels around the Fibs, which might be enough to keep losses in check.
Will this area of interest attract buyers?
GBP/CAD 4-hour Forex Chart by TradingView
A bleaker trade outlook for Canada and a relatively resilient U.K. economy combined forces to enable GBP/CAD to bust through a strong resistance zone around the 1.8100 major psychological mark last month.
However, rising crude oil prices and some tariffs exemptions for Canada allowed the Loonie to regain a bit of ground in the past weeks.
GBP/CAD now looks poised to test the former ceiling, which could hold as support as it coincides with the 61.8% Fibonacci retracement level.
Is a bounce in order?
Remember that directional biases and volatility conditions in market price are typically driven by fundamentals. If you haven’t yet done your homework on the British pound and the Canadian dollar, then it’s time to check out the economic calendar and stay updated on daily fundamental news!
The area of interest also lines up with S2 (1.8090) that could add another layer of support, although a shallow correction could already find buyers at the 50% Fib that’s around S1 (1.8220).
If any of these levels are able to hold as a floor, look out for a potential continuation of the climb back to nearby resistance zones at the pivot point level (1.8440) or all the way up to the swing high at R2 (1.8790).
On the other hand, sustained bearish pressure below the resistance-turned-support region could keep pulling GBP/CAD down to the next targets at S3 (1.7870) then S4 (1.7650) or all the way down to this year’s lows at S5 (1.7440).
Note that, while the 100 SMA is above the 200 SMA for now, the faster-moving MA is turning lower and could be bracing for a bearish crossover. Also, GBP/CAD has already tumbled below both moving averages, so these could hold as dynamic resistance from here.
Whichever bias you end up trading, don’t forget to practice proper risk management and stay aware of top-tier catalysts that could influence overall market sentiment!
