The GBP/CAD pair initially fell during the course of the session on Monday, but turned back around near the 1.9350 level to form a massive hammer. The 1.95 level above is resistance, and of course a large, round, psychologically significant number. Because of that, if we break above the top of the hammer week would see this market go much higher, perhaps heading to the 2.0000 level.
Pullbacks could be buying opportunities as well, but I also recognize that there is a significant signal to start selling possibly if we get below the bottom of the hammer for the session. The reason I say this is that we are essentially making a “double top” at the 1.95 level, and breaking below the bottom of the hammer of course shows a significant amount of support had been broken. However, I also recognize that the MACD histogram is currently lower at this level that it was the last time we visited this level. That essentially shows divergence, which of course is a very bearish signal.
Very important level
If we can get above there, I don’t see any reason why we don’t go to the “double parity” level. However, if we break down here I would not be surprise at all to see this market head to the 1.90 level next, and then perhaps break down significantly. However, I will say that I see quite a bit of strength in the British pound in general, and as a result I would anticipate that this market should go higher.
On top of that, well markets aren’t exactly trending nicely at the point, so if we can get a significant move in the oil market, then perhaps we could get some direction in the Canadian dollar. With a strong British pound against the US dollar, and the Canadian dollar suffering at the hands of a very indecisive oil market, I just think that the odds favor a move higher. However, until we break out I will be hesitant to put any money into the marketplace.
