GBP/CAD trims losses and rebounds to the 1.7150 area

• Pound is under pressure on Monday, holds onto daily losses.
• Loonie pulls back during the American session versus other commodity currencies amid improvement in risk sentiment.

The GBP/CAD pair bottomed on Monday at 1.7046 and the rebounded rising to 1.7165. As of writing, it trades at 1.7135, almost 150 pips below Friday’s close. The key driver has been the decline of the pound across the board affected by the new strain of COVID-19 in the UK and the lack of agreement between the European Union and the United Kingdom regarding their future commercial relationship after December 31.

The pound tumbled as more countries cancelled flight to the UK on reports of a highly contagious coronavirus strain in the UK. Also, the government announced more restrictions and affected market sentiment globally. Markets received a relief after US lawmakers agreed on a new stimulus package.

The Dow Jones is falling by 0.35% after being down by almost 3% earlier on Monday. The improvement in risk sentiment helped the pound that trimmed losses across the board but still heads for important losses and remains under pressure.

From a technical perspective, GBP/CAD is now with a bearish bias in the 4-hour chart with the price under the 20-SMA. A recovery above 1.7200 would alleviate the negative pressure. The next resistance stands at 1.7290/1.7300. On the flip side, the immediate support is located at 1.7100 followed by the daily low at 1.7040.

A close around current level in GBP/CAD would confirm the slide back under the 20, 55 and 100-day moving average. On a wider perspective, while above 1.6750/1.6800 the bias will remain sideways.

Technical levels