- The British pound has rallied rather significantly during the Monday session, as it looks like we are in fact going to go much higher, as the 1.82 level is now in the rearview mirror.
- After breaking out the way we have, I think you have a situation where traders will continue to look into the British pound over the Canadian dollar, which makes quite a bit of sense considering that the Canadian economy could very well find itself dealing with tariffs from its biggest trading partner.
Furthermore, the Canadian economy is likely to continue to struggle overall, now we are getting reports out of the Atlanta Federal Reserve that the US economy might be slowing down, which will be toxic for Canada as it is almost solely depended on sending its exports into the United States. In an environment where your biggest customer might be struggling, that is not a good look.
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Technical Analysis
The technical analysis for this GBP/CAD market is obviously bullish, and we are a little overbought at this point, but I also recognize that buying begets more buying. As his momentum picks up, we could see the British pound go racing toward the 1.85 level. Underneath, the 1.82 level should offer a significant amount of support based on the previous resistance barrier being there. If we were to break back below there, it would obviously change a lot of things, but right now it looks like we are ready to go much higher. I have no interest in shorting this market, mainly due to the fact that I have no interest whatsoever in owning the Canadian dollar.
The size of the candlestick is very strong, and it does suggest that we will have plenty of momentum here in order to push the market to the upside. That being said, we will get the occasional pullback, but I think it remains a bit of a “buy on the pullbacks” type of scenario.
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