GBPCAD recorded its biggest daily gain in more than two years on Friday, with the pair rallying by 2.0% to find resistance around 1.6610, which is the 38.2% Fibonacci of the downleg from 1.7793 to 1.5873 – a key support area during 2018.
Although the market opened lower on Monday, the bullish pressure remains strong as the MACD keeps increasing momentum above its signal line and the RSI holds well above its 50 neutral level despite slowing a little bit. The Stochastics, though, have bounced back into the overbought territory, hinting that room for improvement could be limited.
Failure to crawl above the 38.2% Fibonacci of 1.6610 would shift the spotlight down to the 23.6% Fibonacci of 1.6333, a break of which could send the price to the bottom of the Ichimoku cloud currently seen around 1.6100. Lower, the bears will attempt to clear the two-year low of 1.5873 in order to reach the 2017 trough of 1.5734.
On the flip side, a decisive move above 1.6610 may find resistance near the 50% Fibonacci of 1.6836. If buying interest persists, the price could challenge the 200-day simple moving average (SMA) before testing resistance between the 61.8% Fibonacci of 1.7063 and the 1.7177 barrier.
Meanwhile in the medium-term picture, the downward pattern triggered from the 1.7793 peak is keeping sentiment on the negative side. That said, a determined rally above the 50% Fibonacci could signal that the worst phase of the bearish mood is over.
Summarizing, GBPCAD needs to resume positive momentum comfortably above 1.6610 to ensure the sustainability of the latest rebound. In the medium-term picture, a stronger upturn above 1.6836 is required to eliminate downside pressures.