GBP/CAD has seen a sharp decline within a rising channel, indicating a potential continuation of the downtrend as the counter-trend reaction runs its course. The pair is currently in a short-term downtrend, with a bearish outlook expected as it heads towards the blue 100-day Simple Moving Average at 1.7641. A break below the October 3 low of 1.7720 would further solidify bearish bets, with downside targets at 1.7603 and 1.7407. In the most bearish scenario, the price could even fall to the lower channel line at 1.7375.
Despite the current downtrend, caution is advised for short-holders as GBP/CAD remains in an uptrend on medium and long-term timeframes, oscillating higher within an ascending channel. This presents a risk of a reversal higher occurring unless the current sell-off marks the beginning of a deeper downtrend, which is possible given the steepness of the decline. The Moving Average Divergence Convergence (MACD) crossing sharply below its signal line adds further bearish confirmation to the outlook.
The formation of a bearish Shooting Star Japanese candlestick reversal pattern on September 20 indicated the first signs of weakness, followed by a consolidation period before the proper fall began on October 1. Continued monitoring of key levels and technical indicators, such as the MACD, will be crucial in determining the potential future direction of GBP/CAD. Traders should also keep an eye on any potential reversal signals in the medium to long-term timeframes to avoid being caught off-guard by a sudden change in momentum.
