Chart: GBP/CAD reversal pattern formation

This GBP pair seems to be struggling to support its recent trend and a chart pattern is forming to suggest a potential reversal.

GBP/CAD made several failed attempts to break the minor psychological mark of 1.7850 and is now testing the double neckline support around 1.7700.

Will we see a lower break and downtrend soon?

GBP/CAD 4 Hour Forex Chart from TradingView

Several errors in UK economic data released this week appear to have weighed on the pound as traders eye another likely interest rate cut from the Bank of England (BOE).

Notably, the average earnings index fell below market estimates, suggesting weaker inflationary pressures, while the monthly GDP reading also came in weaker than expected. Core data, including the merchandise trade balance and industrial production figures, reflected weakness.

Could these be enough to put further downside pressure on GBP/CAD?

Remember that directional biases and market price volatility conditions are usually driven by fundamentals. If you haven’t done your homework on the British pound and the Canadian dollar yet, then it’s time to check the economic calendar and stay up to date with the daily fundamentals!

The pair is already testing the 200 SMA dynamic inflection point which lines up with the breakout support, so watch out for a breakdown that could be followed by a drop to the same height as the chart pattern or 150 pips.

Keep an eye out for potential bounces from the support areas at S2 (1.7650) then S3 (1.7600) as these also align to psychological levels.

However, the 100 SMA is still above the 200 SMA to suggest that support is more likely to hold than break, possibly prompting another retracement to resistance levels near the pivot point (1.7790) or even R1 ( 1.7870).

Remember to practice proper risk management and be aware of top market catalysts when trading it. Luck!