GBPUSD, USDCAD Outlook: Dollar Loses Market Steam

Key Events:

• UK Claimant Count Change and UK CPI
• Canadian CPI Indicators
• Flash PMI Indictors
• FOMC Member and Trump Announcements Risks

GBPUSD Fundamentals

Key events for the British pound this week include the claimant count change on Tuesday, the UK CPI on Wednesday, and flash manufacturing and services PMI on Friday. The latest claimant count change report showed a change of 0.7K, reflecting strong labor market conditions alongside elevated inflation risks. Year-over-year UK CPI stands at 2.5%, near 10-month highs. However, the strong US inflation rate indirectly affects UK inflation, supporting GBPUSD’s latest rebound above 1.25– though tight policies or renewed trade war risks could reverse this trend.

USDCAD Fundamentals

The USDCAD appears to have peaked in February 2025 at 1.4793 following the heightened US trade war tensions. As fears over tariff announcements ease, the dollar’s bullish momentum retreats. Contributing to a notable reversal in USDCAD. Yet, key risks remain regarding Trump’s ambitions to integrate Canada as the 51st state. Key economic events this week include the release of Canadian CPI metrics on Wednesday.

Technical Analysis: Quantifying Uncertainties

GBPUSD Outlook: 3-Day Time Frame – Log Scale

Source: Tradingview

On the 3-Day time frame, the relative strength indicator appears to be forming an inverted head and shoulders pattern formation below the 50 neutral zone. This pattern could boost bullish momentum above the both the 50 level and 1.2630 threshold- pushing the RSI towards the 60 zone and testing the 1.28 resistance level.

This setup aligns the trendline connecting the consecutive higher highs from January 2025 to Feb 2025 and the trendline connecting the consecutive lower highs from 2014 to 2021. A firm break beyond the 1.28 mark can extend gains towards the 1.2950 level, aligning with the 0.618 Fibonacci retracement level measured from the September 2024 high of1.3434 to the January 2025 low of 1.21.

Downside risks: a move below 1.25 mark may reverse gains toward 1.2360, 1.2280, and 1.21- the final barrier before a potential bearish extension toward 1.17.

USDCAD Outlook: 3-Day Time Frame – Log Scale

Source: Tradingview

USDCAD is currently retesting the 0.236 Fibonacci retracement level of the uptrend and motive wave between May 2021 and January 2025, aligning with the mid-zone of the respected-up trending channel at 1.4150. A close below 1.4150 can extend the drop towards the 1.40 zone.

With the 3-Day RSI near the 50 neutral zone, holding above 1.4150 may face resistance at 1.4520 and 1.4680, while a close above 1.4680 could pave the way for a sustained bullish run for the dollar against the CAD.

Written by Razan Hilal, CMT

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