The GBPCAD reversed course last month after an aggressive downtrend that took the pair 5,200 pips lower in just over a year. While there’s no guarantee the selloff has ended, last week’s close above 1.7540 was a sign that buyers are back.
The 1.7540 area has been a crucial factor for the pound cross. It dates back to 2008 but is better known as the level that attracted buyers in September and November of 2014.
A look at the weekly chart below shows how the level also attracted offers following the June 24th Brexit from last year.
With Fridays close, we now have a weekly and monthly close above the 1.7540 handle. As such, any rotation lower toward this area should attract a meaningful bid.
Of course, there’s a chance we won’t see such a pullback. The bullish momentum of late has been impressive, and given the suppressed state of the pair over the past thirteen months, I wouldn’t be surprised to see the pair grind higher from here.
If that happens and today’s session remains below Friday’s high at 1.7715, we will have a bullish inside bar to work with. And with over 400 pips to the next key resistance at 1.8110, there’s plenty of room for a move higher.
With that said, I would prefer to see a pullback to new support. It would reinforce the idea that 1.7540 is indeed new support and would also offer a more favorable risk to reward ratio.
As for event risk, the British pound faces several PMI figures between Tuesday and Thursday including those for manufacturing, construction, and services. Canada also reports their Q1 trade balance on Thursday at 8:30 am EST.
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