**GBP/USD Consolidation Continues While USD/CAD Shows Ongoing Strength**
*Adapted and expanded from an article by ActionForex.com*
The foreign exchange market kicked off the new trading week with mixed sentiment across various currency pairs. Two major pairs drawing particular attention are GBP/USD and USD/CAD. The former continues to trade within a consolidation range, showing little directional impulse, while the latter strengthens, buoyed by broad U.S. dollar performance and underlying weakness in the Canadian dollar.
This article delves into the technical and fundamental factors influencing the recent price action, interpreting chart signals, economic catalysts, and market positioning behind these prominent currency pairs.
—
## GBP/USD: Consolidation Dominates Short-Term Outlook
GBP/USD has entered a period of consolidation after experiencing a moderate upward move in recent weeks. The pair is finding it difficult to break convincingly above the 1.2800 psychological level and currently trades within a tight range.
### Technical Overview
– **Chart Patterns**:
GBP/USD has formed a sideways corrective pattern following a minor rally in early June. This aligns with a classic consolidation structure such as a flag or flat correction.
– **Resistance Zones**:
– Primary resistance exists near 1.2847, which marks a recent swing high.
– Higher resistance lies around 1.2893, a level that has previously acted as a turning point.
– **Support Levels**:
– Immediate support comes in at 1.2620, where buyers have stepped in recently.
– A stronger floor lies at 1.2547, near the 50-day simple moving average (SMA), which could act as a springboard for future upside moves.
### Elliott Wave Perspective
– The pair appears to be within a corrective wave structure, potentially a fourth wave, within a larger impulsive sequence from the 1.2298 low.
– Forecasts suggest the current correction could resume upward movement after consolidative pressure resolves.
### Momentum Indicators
– **Relative Strength Index (RSI)** remains neutral, hovering around the 50 mark. This indicates a lack of clear momentum in either direction.
– **MACD histogram** has narrowed, aligning with consolidation dynamics and a potential for a next leg higher if momentum rebuilds.
### Fundamental Catalysts
– **Bank of England (BoE)**:
Market participants await signals regarding the BoE’s next move on interest rates. Although inflation data has cooled slightly, wage growth remains firm, leaving the BoE cautious on rate cuts.
– **UK Macroeconomic Data**:
– Services and manufacturing PMIs have shown signs of resilience.
– CPI inflation remains above the Bank’s 2% target, complicating future monetary policy decisions.
– **Political Risk**:
The upcoming UK General Election may inject volatility, especially if polls point to uncertainty in political leadership.
### Forecast
Despite recent sideways movement, the general medium-term outlook for GBP/USD remains slightly bullish if support levels hold. A break above 1.2847 would open the way to further recovery towards 1.3000. However, failure to maintain momentum may lead to a deeper pullback toward the 1.2500 handle.
—
## USD/CAD: Sustained Strength Driven by U.S. Dollar and Oil Correlations
In contrast to GBP/USD’s neutral stance, the USD/CAD continues to strengthen, reflecting both a firming U.S. dollar and a weakened Canadian dollar. Recent developments suggest bullish control remains intact, with the currency pair reaching new local highs.
### Technical Landscape
– **Price Action**:
USD/CAD has moved upward from the 1.3600 region and is currently eyeing a retest of the 1.3805 local resistance. The trend remains upward as higher lows and higher highs build.
– **Key Resistance Levels**:
– 1.3784: The high from mid-April, now serving
Read more on USD/CAD trading.