GBPCAD is pulling up from its steady drop and might be in for a large correction to the area of interest at the 1.7100 major psychological mark.
This lines up with the 61.8% Fibonacci retracement level, which adds to its strength as resistance. A smaller pullback could find sellers at the 50% level that lines up with the 200 SMA or the 38.2% Fib just past the 1.7000 major psychological resistance.
The 100 SMA is below the 200 SMA to confirm that the path of least resistance is to the downside or that the selloff is more likely to resume than to reverse. The gap between the indicators is widening to reflect strengthening bearish momentum.
Stochastic already reached the overbought zone and is starting to turn lower to signal a return in bearish pressure. If the Fibs hold, GBPCAD could resume the slide to the swing low near the 1.6900 major psychological level.
RSI seems to have a bit more room moving up, so price could follow suit until overbought conditions are met.
There are no major reports due from the UK economy, but it’s worth noting that its retail sales figures disappointed and confirmed that supply chain issues are in play. This could worsen the ongoing stagflation problem as price pressures keep increasing while growth remains lackluster.
Meanwhile, the Loonie could draw support from rising crude oil prices, especially if the upcoming EIA report prints a smaller build or a surprise draw. The energy crunch is in play all over the globe, particularly in Europe and China, so there’s plenty of upside pressure on the commodity.
Analysts are expecting to see a build of 1.1 million barrels, lower compared to the previous 2.3 million barrel increase. A larger build, on the other hand, could signal that supply is able to keep up with rising demand.