In their March decision, Bank of England (BOE) members shared that they expect price levels to decline after a notable acceleration in February.
But this week’s reports are showing that the U.K.’s labor market remains tight while inflation remains high!
Not surprisingly, GBP traders are pricing in more tightening from the BOE.
GBP/CAD 1-hour Forex Chart by TradingView
Anticipation of further BOE tightening likely contributed to GBP/CAD jumping from its 1.6540 intraweek lows all the way to its current levels near 1.6700.
Can GBP bulls keep up the pressure though?
Note that 1.6700 psychological level lines up with the 61.8% Fibonacci retracement of last week’s downswing AND the 200 SMA on the 1-hour time frame.
If the current momentum is strong enough to bust GBP/CAD from the technical resistance, then I’ll be keeping my eyes peeled for an even bigger resistance zone.
I’m talking about the 1.6800 area!
Aside from lining up with a descending channel resistance that’s been around since late March, the 1.6800 psychological level is also around the April highs that GBP bulls have yet to conquer.
Until we see a game-changing headline, or until GBP/CAD reacts (read: gets rejected) from the 1.6700 and 1.6800 levels that we’re watching, it’s still better to take advantage of the current momentum.
A long trade at current levels could still get you pips until GBP/CAD shows signs of reversing its intraweek trend.
You can use the 1.6800 channel resistance as your initial target while placing stops just under the consolidation near the 38.2% Fib.
However you choose to take advantage of GBP/CAD’s observable upside breakout, make sure to note GBP/CAD’s average volatility so you know where you can place your entry and exit targets!
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