Image © COSPV, Adobe Stock

- GBP/CAD looking weak after bearish "evening star" pattern.

- USD/CAD also in free-fall after false breakout to upside.

- EUR/CAD remains in downtrend but bullish signals emerge.

Pound Sterling's bounce higher against the Canadian Dollar is "not really convincing" and the pair is biased towards seeing more losses in the short-term, according to the Toronto-headquartered Scotiabank.

"GBP/CAD edged off the intraday low yesterday, without really convincing, and may be doing something similar today as the market chops around the 100-day Moving Average," says Shaun Osborne, chief FX strategist at Scotiabank, in a recent note to clients.

Above: Pound-to-Canadian-Dollar rate shown at daily intervals.

The most salient feature of the chart is the bearish "evening star" candlestick reversal pattern that formed at the October 11 highs and is circled above.

"The GBP is meeting decent selling pressure around the highs intraday this week and we think this underscores near-term downside risks at least," says Osborne.

The breakout from the falling channel may even be a 'false break' in which case the exchange rate could break back inside the range and target 1.7000, the bank says.

USD/CAD

Above: USD/CAD rate shown at daily intervals.

"The near-to-medium term trend lower in USDCAD remains intact and the market’s rejection/failure against noted resistance at 1.3065/75 underscores the soft undertone in the market at the moment, we feel," says Osborne.

The next pivotal level for the pair is at the high point of a historic gap at 1.2885. The future trajectory of USD/CAD depends on what happens there. If there is a bounce higher, it could mark a new uptrend but if the downtrend simply cuts through the 1.2880 threshold then a more bearish outlook is envisaged.

Gaps are key sentiment levels on charts where traders who were wrong when the gap formed often re-enter the market to try to break even - in this case, wrong-footed buyers. This can change supply-demand mechanics and alter a trend.

"Trend signals are tilting bearish on the intraday chart but are resolutely neutral on the daily and weekly signals— meaning there is scope for a move to develop one way or another," Osborne concludes.

EUR/CAD

The pair has formed a bearish "shooting star" candlestick after rising and falling during the previous day but despite this, the outlook is slightly bullish.

Above: Euro-to-Canadian-Dollar rate shown at daily intervals.

The top of the gap is expected to provide support to the EUR/CAD pair and potentially lead to a reversal in the short-term trend. However, at the same time, a break through the gap level would leave the market "exposed to further weakness", probably leading to a fall toward the bottom of the gap at 1.4925.

"We spot minor support here at 1.4950/75 (the former gap) and we note that broader price signals (weekly) looked constructive for the EUR through the close of last week," says Osborne.

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