(MENAFN- Daily Forex) A global recession is now near-certain, but the UK economy is well-positioned to bridge the period to recovery with a limited increase in debt . It adds a fundamental catalyst to the British Pound, which is in a reversal following a panic-induced sell-off. The £350 billion stimuli or 15% of GDP is equal to war-time funding. While the economic fallout expected to be more severe than during the 2008 global financial crisis, sound fiscal measures implemented by the UK support a stronger currency moving forward. After the breakout in the GBP/CAD above its short-term support zone, more upside favored.
The Force Index, a next-generation technical indicator, advanced to a new monthly high and confirmed the breakout in this currency pair. As the GBP/CAD is retesting its converted short-term support zone, the Force Index started to retreat. It is expected to challenge its horizontal support level after pushing below its descending resistance level , as marked by the green rectangle. Bulls remain in control of price action with the ascending support level adding upside pressure on this technical indicator.
This currency pair is currently confirming the conversion of its short-term resistance zone into support, which is located between 1.72818 and 1.73954, as identified by the grey rectangle. The breakout in the GBP/CAD above its descending 61.8 Fibonacci Retracement Fan Resistance Level, converting it into support, resulted in a significant bullish catalyst. Canada is faced with economic problems from the Covid-19 pandemic and the collapse in oil prices . It additionally operates from a weak fiscal platform, adding downside pressure to the Canadian Dollar.
One essential level to monitor is the intra-day high of 1.75248, marking the bottom range of a massive price gap to the upside. A sustained push higher is anticipated to initiate the next wave of net buy orders in the GBP/CAD, filling the price gap , and providing the necessary volume for price action to extend its breakout sequence. The next resistance zone is located between 1.79193 and 1.80508, as marked by the red rectangle. You can learn more about a resistance zone here .
GBP/CAD Technical Trading Set-Up - Breakout Extension Scenario
In the event of a collapse in the Force Index below its ascending support level , the GBP/CAD may attempt a correction. Due to the dominantly bullish outlook for the British economy in contrast to the dismal Canadian condition, any sell-off from current levels should be considered an excellent buying opportunity. The downside potential remains limited to the 50.0 Fibonacci Retracement Fan Support Level. It entered the support zone located between 1.65427 and 1.67524.
GBP/CAD Technical Trading Set-Up - Limited Breakdown Scenario
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