Image © Adobe Stock
Today we're watching the Pound vs. Canadian Dollar rate (GBP/CAD) as it knocks on a key resistance leve
The pair rose to 1.8590 (i.e. just short of the round 1.86) on Wednesday and is attempting to prod it again on Thursday.
As the below shows, this marks a resistance point that can stretch right back to mid-March. In fact, so significant is this line that it makes you realise the days spent above here were an outlier owing to the notable selling interest.
Above: GBP/CAD at daily intervals.
This type of behaviour is very typical of GBP/CAD, which is an exchange rate that can build notable medium-term tops. We wonder if the current attempt to storm the highs will be repelled, as has been the case so often.
If so, GBP strength against CAD will fade anywhere north of here as participants will likely be quick to sell.
Nevertheless, the technical setup is still constructive for GBP/CAD and we suspect a break will eventually occur at some point, at which point a move to the 2025 highs at 1.8716 transpires.
The Relative Strength Index (RSI) in the lower panel is rather flat and suggests there is not much momentum heading into the test of resistance, leaving us thinking a pullback might occur as the selling pressure builds.
We might not be ready for a break higher, but the sense is that it remains a likelihood on a multi-week time frame.
This is particularly the case if the "sell America" trade is revived now that the good news on the U.S. climbdown is in the price.
Tariff levels will remain elevated at pre-Trump levels, and this means a slowdown for the U.S. and its close neighbour Canada, ensuring the fundamental case for CAD weakness remains intact for the foreseeable future.