GBP/CAD traded lower on Monday after it hit resistance near the 1.7150 level. Last week, the pair dipped below the upside support line drawn from the low of January 11th, and although it is still trading above the medium-term upside support line taken from the lows of August, we believe that there is ample room for some further near-term declines.
Currently, the rate looks to be heading towards the 1.7050 zone, marked by the lows of January 20th and 21st. That said, we would prefer to wait for a move below the low of January 16th, at around 1.7015, before we get confident on larger bearish extensions. Such a dip may encourage the sellers to drive the battle towards the 1.6935 area, marked by the inside swing highs of January 9th and 10th. Another break, below 1.6935, could extend the slide towards the low of January 15th, near 1.6835.
Shifting attention to our short-term oscillators, we see that the RSI just touched its toe below 30 and is pointing down. The MACD lies deeply in the negative zone, just below its trigger line. Both these indicators suggest strong downside momentum and support the notion for this exchange rate to continue drifting south for a while more.
On the upside, we would like to see a decent recovery above 1.7190 before we start examining whether the bears have abandoned the battlefield, at least in the short run. Such a move could initially pave the way for the 1.7285 zone, which is near Thursday’s high. If that level fails to stop the rate from moving higher, then we may see the bulls pushing for the 1.7370 or 1.7395 obstacles.