GBP/CAD Testing Rising Wedge Top

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GBPCAD formed higher lows and higher highs to consolidate inside a rising wedge pattern on its 4-hour time frame. Price is testing the resistance and could be due for a dip back to support.

The 100 SMA is still below the 200 SMA for now, so the path of least resistance is to the downside. In other words, resistance is more likely to hold than to break. However, the gap between the indicators is narrowing to reflect weakening bearish pressure and a potential bullish crossover.

In that case, there’s a chance GBPCAD could break past the resistance at the 1.7100 major psychological mark and go for a rally that’s the same height as the chart pattern or roughly 400 pips. Price is already trading above both dynamic inflection points, so these could hold as support on dips.

RSI is pointing down, though, so there could be a return in selling pressure. Stochastic has a bit of room to climb, but the oscillator is also closing in on the overbought zone to signal exhaustion.

Canada’s employment report is up for release later today, and analysts are predicting a 36.5K pickup in hiring. This would be stronger than the earlier 31.2K gain in employment and probably enough to bring the jobless rate down a notch from 6.7% to 6.6% in November.

Stronger than expected results could mean more upside for the Loonie, possibly leading to a break below the wedge support at 1.7000. If that happens, GBPCAD could be in for a drop that’s the same height as the chart pattern.

On the other hand, weak data could spur a break higher, especially with crude oil prices also on the back foot these days. The release of oil reserves into the global market and a likely dip in demand following the emergence of the Omicron variant could mean downside pressure for the correlated Loonie.

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