GBPCAD has formed lower highs and found support at the 1.7565 area, creating a descending triangle pattern on its 1-hour chart. Price looks ready to test the triangle top at 1.7650 and might resume the slide back to support if it holds.
The 100 SMA is below the 200 SMA to indicate that the path of least resistance is to the downside. In other words, the triangle top is more likely to hold than to break, especially since it lines up with the 200 SMA dynamic inflection point.
Stochastic is still heading higher so there is some bullish pressure left for an actual test of the triangle top. Turning lower would mean that selling pressure is returning. Similarly RSI has a bit more room to climb before reaching the overbought zone to reflect exhaustion among buyers.
There are no major reports due from both the UK and Canadian economy in the next trading days, but it’s worth noting that the Loonie could take advantage of stronger crude oil prices. Note that the OPEC is meeting this week, and stronger commitment to their output deal could mean more gains for the commodity and the correlated Canadian dollar.
Then again, the UK is also making good progress in its vaccination program, possibly allowing the economy make a strong recovery in the latter half of the year. Canada has managed to secure a large share of the vaccines, but it seems to be making slower progress compared to the UK.
Risk appetite might work in favor of the Canadian dollar, though, as the higher-yielding commodity currency could benefit from stronger business optimism. More developments on the vaccine front and hopes for stimulus could bring about an earlier return to normal business conditions, which would increase purchases of crude oil and demand for riskier currencies.