GBPCAD had been trending higher inside a rising channel on its 1-hour chart but is breaking below support to signal that a reversal is due. Technical indicators are giving opposite signals, though.

The 100 SMA is still above the 200 SMA to indicate that the path of least resistance is to the upside or that the uptrend is more likely to gain traction than to reverse. Then again, the gap between the moving averages has narrowed to reflect weakening bullish momentum and a potential bearish crossover. Price is also below both indicators, so these could hold as dynamic resistance levels on pullbacks.

RSI is heading down to show that sellers have the upper hand, but the oscillator is dipping close to the oversold region to reflect exhaustion. Stochastic is already in the oversold territory, and turning higher could confirm that buyers are about to take over.

Economic data from the UK turned out weaker than expected, upping the odds that the BOE would lean towards a larger increase in asset purchases. The consensus is for a boost of 100 billion GBP but it could still reach 150-250 billion GBP since the April growth figure turned out very disappointing as well.

The headline CPI fell from 0.8% to 0.5% as expected but the core CPI fell short of consensus as it slipped from 1.4% to 1.2% versus the 1.3% estimate. Producer input and output prices also turned out disappointing. There has been some talk of negative rates from the BOE and the minutes of the meeting should show how policymakers are likely to pursue this tool later on.

Keep in mind, however, that crude oil prices are also on weak footing as risk appetite has been taking hits on second wave pandemic fears and geopolitical tensions. This could also keep a lid on the Canadian dollar’s gains, although Canada’s CPI and retail sales releases might provide more direction later in the week.