It returns to the trendline after the break – at the pivot point

• GBP/CAD is returning to the lower side of a trendline it broke below.
• The pair is consolidating after entering a rising channel.

GBP/CAD pulls back after unfolding a partial down leg in a wider ascending channel. It is likely in a short-term downtrend, which, given the principle that “the trend is your friend” marginally favors more downside.

The pair broke below an important trendline (“Trendline A” on the chart) on October 3rd. It then bottomed out and has since recovered to the lower part of the trendline.

GBP/CAD 4 hour chart

GBP/CAD is at a critical turning point: it could either break back above the trend line, thus reversing the trend, or it could turn around and continue lower.

A break below the consolidation base (dashed line on the chart) would indicate a continuation down. Such a move would be expected to reach an initial downside target at 1.7620 (Fibonacci 61.8% of the range high extrapolated below), followed by around 1.7605 (September 4 low).

A decisive break back above the trend line, on the other hand, would suggest a trend reversal. This is possible given that the medium and long-term trends are bullish and the pair is in an ascending channel. Furthermore, the Moving Average Convergence Divergence (MACD) has crossed the signal line and is rising steeply, indicating a strong upward momentum accompanies the current move.

To be decisive, such a break should be accompanied by a long green candlestick that breaks well through the trendline and closes close to the high, or three green candlesticks in a row that have clearly broken above the trendline. trend.