GBPCAD: Developing an evening star pattern
The UK gross domestic product (GDP) rose to 1.2% year-on-year in the second quarter of 2018, revised lower from a preliminary estimate of 1.3% and slightly above 1.1% in the previous period.
The Canadian economy displayed a trade surplus of CAD 0.526 billion in August, comparing to a CAD -0.189 billion deficit in the previous month and stronger than analysts’ forecast of a CAD -0.5 billion deficit. Imports fell 2.5% while exports were down 1.1%.
Since the beginning of October, the GBPCAD gained over 2.0% and is in a recovery phase since early October.
On the last Friday session, the GBPCAD initially rose but found enough resistance near 1.7260 to erase all of its gains and closed near the low of the day. In addition, the currency pair managed to close below Thursday’s low, which suggests a strong bearish momentum.
Stochastic is showing an overbought market although is still displaying a strong bullish momentum.
After the third attempt to break below the year-to-date low at 1.6591 in early October, the currency pair found enough support to begin a sharp upward correction. However, on last Friday the bullish momentum seems to have stopped at a key level 1.7175 and created an evening star pattern. An evening star is a bearish, top trend reversal pattern that warns of a potential reversal of an uptrend.
GBP/CAD Daily Candlestick Chart
Written by Hugo O’Neill, External Analyst
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