GBP/CAD Price Prediction: Signs that a counter-trend decline may be developing

GBP/CAD is showing signs that it may be about to reverse lower.
The pair formed a bearish candlestick pattern and has since declined.

GBP/CAD is threatening to reverse its uptrend after testing the upper channel line of its long-term rising channel and forming a bearish reversal candlestick pattern (orange rectangle on chart below).

GBP/CAD 4-hour Chart

GBP/CAD formed a bearish Shooting Star Japanese candlestick pattern on both the Daily and 4-hour charts on September 20 after a false break above the upper channel line. The subsequent weakness suggests this candlestick may mark a top of the pair.

Although GBP/CAD is in a strong uptrend on all time frames, it is rising and falling within a channel and there is a growing chance the pair may be entering one of its counter-trend bear phases.

A break below 1.7949 (September 19 low) might confirm a reversal of the short-term trend and lower prices to come. A break below 1.7907 would provide stronger confirmation. Downside targets lie at 1.7754 (September 17 low and 50-day SMA), 1.7694 (September 16 low) and 1.7603 (September 4 low) and 1.7407 (August 8 low).

The Relative Strength Index (RSI) is also forming a bearish divergence with price compared to the September 17 low (red dashed line on chart above). Although the price was much lower on September 17 momentum was not, rather it is lower now. This suggests underlying weakness could push prices down.

A break above the high of the Shooting Star at 1.8245 would probably confirm that price is going even higher. If so, it might reach a target at 1.8278, the 61.8% extrapolation of the prior move higher.

Any further bullishness beyond the confines of the channel is likely to be short-lived, however. Such moves are signs of “exhaustion” and are a precursor to deeper corrections on the horizon.

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.