GBPCAD has been hovering inside the rather tight 1.6535-1.6862 rectangle since mid-March. The first test of the upper boundary was unsuccessful, but the bulls appear determined to make another attempt. They have been holding all the cards since the September 26, 2022 low of 1.4038, achieving an impressive 20% rally despite the BoE’s measured approach.
The bulls are actively looking for sufficient evidence to stage another upleg. However, the momentum indicators appear to be less enthusiastic about this prospect. The Average Directional Movement Index (ADX) is pointing to a trendless market, which can also be deemed as preparing the ground for the next move.
In the meantime, the RSI is exhibiting some bullish tendency and the stochastic oscillator is trying to find its direction. The latter is hovering below its overbought territory and the resistance set by its moving average (MA). A failure to break above its MA could be seen as a bearish signal. Having said that, the convergence of the 50- and 100-day simple moving averages (SMAs) and the tightness of the Bollinger Bands probably means that a sizeable move is imminent.
If the bulls maintain control of the market, their immediate target would be to break the much-talked May 6, 2021 high of 1.6862. Τhe path would then be clear until the 1.7080 area defined by the October-November 2021 highs. Even higher, the bulls would like to test the resistance posed by the February 21, 2022 high of 1.7358.
If the bears manage to take over the reins, their first target could be the lower boundary of the current rectangle at 1.6535. The dynamic 50- and 100-day SMAs at the 1.6535-1.6555 range could prove tougher to crack. If successful, the bears would be faced with the 1.6100 level, where the 61.8% Fibonacci retracement of the February 21 – September 26 downtrend currently resides.
To sum up, the market has reached a short-term balance. Bulls appear to have the upper hand but need support from momentum indicators to achieve a break above 1.6862.