The bounce in this pair appears to have run its course, with the gains petering out around the £0.7900 area. A move lower would need a break below the 50-day SMA at £0.7873, which would then raise the possibility of a move to the late April lows below £0.7750.
Any continuation of the rally must clear the highs of Monday, around £0.7930.
With risk appetite recovering around the globe, we may see the Aussie following suit. However, it will need to breach $0.74 in the first instance to suggest that a rally is in the offing.
The risk now is that, like indices on Monday, one final move lower is in the offing, so we wait to see whether the pair can push on above $0.74 or whether it will turn lower and then head towards Monday’s lows at $0.73.
The rally here has come a long way in a very short space of time, but now it has reached the 50-day SMA (C$1.2987). If it can push on above here then more gains may be in store, with targets in the direction of C$1.3264, the 200-day SMA for USD/CAD.
The bounce has provided little in the way of meaningful pullbacks, so a move back down to the Thursday low around C$1.2832 could provide a fresh entry point for those expecting an extension of the rally into the second half of this week.