Unfolds down leg within rising channel

• GBP/CAD is undergoing a sharp decline within a rising channel. 
• It is likely to continue lower as the counter-trend reaction runs its course. 

GBP/CAD is unfolding a down leg within a rising channel. It will probably continue lower to at least the blue 100-day Simple Moving Average (SMA) at 1.7641. 

The pair is in a short-term downtrend, and given the principle that “the trend is your friend,” the odds favor a continuation of that trend. 

GBP/CAD Daily Chart 

Subsequent downside targets lie at 1.7603 (September 4 low) and 1.7407 (August 8 low). In the most bearish scenario, the price could fall to the lower channel line at 1.7375. 

GBP/CAD is in an uptrend on the medium and long-term timeframes, as it oscillates higher within an ascending channel. There is a risk, therefore, of a reversal higher occurring unless the current sell-off marks the beginning of a deeper downtrend. This is possible, given its steepness. 

The Moving Average Divergence Convergence (MACD) has crossed below its signal line, providing added evidence that prices are going to push lower. 

The first signs of weakness came when the pair tested the upper channel line and formed a bearish Shooting Star Japanese candlestick reversal pattern on September 20 (orange rectangle on chart above). It then consolidated for a while before starting to fall properly on Tuesday.