GBP/CAD studies turning back to negative while below 1.7500

GBP/CAD remains in a bearish trend following the BoE announcements and despite the minor recovery attempts from 1.7044.

The BoE surprised markets and acted more aggressively than most had expected with a full array of measures to ensure an easier monetary stance going forward. "But when combining the GBP 60bn Gilt buying, with the GBP 10bn corporate bond buying and the GBP 100bn Term Funding Facility, a potential GBP 170bn expansion of the BoE’s balance sheet was committed to, " explained analysts at BTMU. "That then coupled with the 25bp Bank Rate cut with a promise of possibly a further 15bp cut, was enough to see GBP/USD dropping by 1.7% from yesterday’s pre-announcement high."

GBP/CAD technical picture

Analysts at Scotiabank explained the technical position of GBP/CAD remains precarious. "The July consolidation (bear wedge) broke down last week and effectively condemns the GBP to renewed weakness and, very likely, new cycle lows in the weeks ahead," explained the analysts, "We look for an initial push back to the 1.67 level reached a month ago, but ultimately feel the GBP is liable to dip to the 1.50/1.60 range in the weeks ahead before stabilizing. We spot strong resistance in the mid 1.75 area. We think the GBP needs to recover through 1.7550 on a sustained basis to stabilize and avoid the slide lower we think is coming. Longer term trend studies remain negative; short-term studies, which had moved to more neutral settings in the past month, are shifting back to negative."