GBP/CAD Potential Pullback Amid ECB's Tightening Stance

4 mag 2023

Following comments from ECB's Lagarde after the policy meeting, the Pound Sterling Canadian Dollar (GBP/CAD) has recovered its highs just short of 1.7000. Lagarde stated that the ECB would not be "pausing" in its tightening as inflation remained high, which was in line with the ECB's accompanying statement that highlighted evidence of persisting inflation pressures in the Eurozone. Lagarde further stated that the ECB policy was not tied to the Fed's policy, suggesting that the ECB will not hesitate to raise rates in the future even when the Fed has paused, allowing the Euro to strengthen.

From a technical perspective, the GBP/CAD has reached 1.7145 and then experienced a retracement, with the RSI showing a divergence on the H4 timeframe. Our idea is to look for a pullback between the 38.2% and 61.8% Fibonacci area, where a dynamic trendline is present and has previously acted as support for a pullback.