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Analysis

GBPCAD Analysis | BoC stance boosts GBPCAD rally

BY Janne Muta

|November 21, 2023

GBPCAD Analysis - GBPCAD has rallied over the last four weeks despite lower inflation readings and signs of economic growth softening in the UK. The Bank of Canada's (BoC) reluctance to hike rates further has tilted demand in the FX market in favour of the GBP, helping the GBPCAD rate to rally.

The Bank of Canada (BoC) has recognized the effects of previous rate hikes on the economy and inflation, stressing the importance of not excessively tightening monetary policy. Given the latest less robust economic data, the BoC anticipates that inflation will decrease to 2% by 2025.

Lower-than-expected UK retail sales numbers have raised concerns about consumer sentiment, with a disappointing reading of -0.3% versus the +0.5% expected. At the same time, UK GDP growth has been slow.

Simultaneously, the Canadian economy is also slowing down, with consumer spending increasing only marginally in Q3 2023. The September retail sales report, expected this coming Friday, is anticipated to show a contraction (-0.3% expected, 0.1% previous).

Canada's CPI was confirmed to be in line with expectations after it was predicted to show inflation increasing by 0.1% after falling by 0.1% in September.

Summary of this GBPCAD analysis report

  • GBPCAD Has rallied approximately 2% over the last seven trading days. this strong upside momentum suggests that the GBP Bulls could be targeting levels near the August 2022 High at 1.7314.
  • The market is approaching the August 2022 high (1.7314), but the current upside momentum is strong, and the market still has some way to go before the high is reached. Therefore, the bulls could still be willing to buy the retracements.
  • GBPCAD has rallied over the last four weeks despite lower inflation readings and signs of economic growth softening in the UK. The Bank of Canada's (BoC) reluctance to hike rates further has tilted demand in the FX market in favour of the GBP, helping the GBPCAD rate to rally.


Read our full GBPCAD analysis report below.

GBPCAD Analysis

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GBPCAD Analysis, Weekly

GBPCAD Has rallied approximately 2% over the last seven trading days. this strong upside momentum suggests that the GBP Bulls could be targeting levels near the August 2022 High at 1.7314. The 20 and 50 period moving averages are bullish with the 20 period above the 50 SMA.

At the same time the stochastic oscillator is in the overbought territory signaling that according to technical GBPCAD analysis the market could be approaching a key resistance level.

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GBPCAD Analysis, Daily

Strong upside momentum in GBPCAD has propelled the market to levels near the August 2022 high. The market has rallied over 5% since the September low. It has been creating higher swing lows and higher highs, indicating that the bulls have been willing to pay higher prices after each retracement.

The market is approaching the August 2022 high (1.7314), but the current upside momentum is strong, and the market still has some way to go before the high is reached. Therefore, the bulls could still be willing to buy the retracements. GBPCAD analysis shows the nearest key support level is at 1.7120, a former resistance level that has now been penetrated and could, therefore, be a support level.

If the market fails to attract buyers at or above the 1.7120 support level the market could trade down to 1.7015. Alternatively, the market could be targeting levels near the August 2022 high.

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GBPCAD Analysis, 2h

The 2-hour chart shows the market trading above a support level at 1.7172, while the next minor support level can be found at 1.7148. The latter support level coincides with the 20 period moving average. If this nearest support level fails to attract buyers, we could see the market trading down to 1.7120.

We should monitor price action to see if buyers are engaging with the market again at the support levels. If so, the market could be targeting levels near the August 2022 high.

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Client sentiment analysis

TIOmarkets' clients are bearish with 71% holding a short position and 29% holding long positions in GBPCAD.

Please remember that the retail trader client sentiment is a contrarian indicator as most of the retail traders are on average betting against the market trends. This is why, experienced traders tend to trade against the retail client sentiment. You can follow the TIOmarkets client sentiment live on our Forex dashboard.

The next key risk events impacting this market

  • GBP - Autumn Forecast Statement
  • CAD - BOC Gov Macklem Speaks
  • GBP - Flash Manufacturing PMI
  • GBP - Flash Services PMI
  • CAD - Core Retail Sales
  • CAD - Retail Sales

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How would you trade GBPCAD today?


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Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. All trading involves risk.

DISCLAIMER: TIO Markets offers an exclusively execution-only service. The views expressed are for information purposes only. None of the content provided constitutes any form of investment advice. The comments are made available purely for educational and marketing purposes and do NOT constitute advice or investment recommendation (and should not be considered as such) and do not in any way constitute an invitation to acquire any financial instrument or product. TIOmarkets and its affiliates and consultants are not liable for any damages that may be caused by individual comments or statements by TIOmarkets analysis and assumes no liability with respect to the completeness and correctness of the content presented. The investor is solely responsible for the risk of his/her investment decisions. The analyses and comments presented do not include any consideration of your personal investment objectives, financial circumstances, or needs. The content has not been prepared in accordance with any legal requirements for financial analysis and must, therefore, be viewed by the reader as marketing information. TIOmarkets prohibits duplication or publication without explicit approval.

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Janne Muta

Janne Muta holds an M.Sc in finance and has over 20 years experience in analysing and trading the financial markets.