• GBPCAD trades higher after strong UK CPI report

• Canadian CPI later today could reverse the recent trend

• Momentum indicators are mostly bullish

GBPCAD is trading higher today, benefiting from a strong UK CPI inflation report that most likely cements expectations that the BoE will not announce a rate cut on Thursday. GBPCAD continues to experience a decent bullish trend from the April lows, and it is now preparing to retest the September 29, 2023 ascending trendline. The Canadian CPI report will be released later today and could act as a sizeable obstacle to the current GBPCAD rally.

In the meantime, the momentum indicators remain bullish. The Average Directional Movement Index (ADX) is edging higher and hence confirming the presence of a modest bullish trend in GBPCAD. Similarly, the RSI remains above its 50-midpoint, highlighting a decent degree of bullish pressure. Crucially, the stochastic oscillator has returned inside its overbought (OB) territory. However, a bearish divergence is developing and could affect short-term momentum, especially if the stochastics oscillator fails to make a higher high.

Should the bulls remain confident, they could try to push GBPCAD above the September 29, 2023 trendline, record a new 2024 high and gradually prepare to test the March 9, 2020 high at 1.8045. Even higher, the next credible target could be the 127.2% Fibonacci extension of the February 1, 2022 – September 26, 2022 downtrend at 1.8284

On the flip side, the bears are probably keen to defend the September 29, 2023 trendline and lead GBPCAD lower towards the May 5, 2017 high as 1.7852. If successful, they could have a go at retesting the support set by the April 22, 2024 trendline and the 50-day simple moving average (SMA) at 1.7730. Even lower, the 1.7542-1.7624 region could prove tougher to overcome than currently anticipated.

To sum up, GBPCAD got a boost from the UK CPI report, but this positive momentum could be dented by the Canadian inflation report and the key Fed meeting.