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The Pound to Canadian Dollar exchange rate (GBP/CAD) has come under significant selling pressure over the course of November but could see some near-term relief.
The selloff in GBP/CAD brings it to the 200-day moving average (DMA), currently located at 1.7535, which could provide some near-term support, as this big and significant technical level so often does.
At the time of writing, the level is confirmed to be offering some buying interest, which could mean the exchange rate holds current levels in the short term.
Note, however, that if the level fails, and we get a number of daily closes below here, the market would be in the process of breaking down to the extent that GBP/CAD would be declared to be in a downtrend.
This would open the doors to 1.7290 by year-end.
We note that the Relative Strength Index (RSI) is oversold at 30 and we expect this level to rise somewhat as it is very rare to witness such levels for any period of time.
For this to occur, GBP/CAD must either recover or consolidate some levels. It is our preferred expectation that this happens this week, meaning levels above 1.76 is likely.
The GBP/CAD's decline has been led by the sharp fall in the GBP/USD since President Trump won this month's election, and we expect the GBP/CAD to ultimately rely on the GBP/USD for direction.
This means that should a GBP/USD rebound occur, then GBP/CAD can also rebound. The 'Trump trade' is getting advanced, particularly given the incoming president has made most of the important nominations.
The latest nomination of consequence is that of Treasury Secretary with the appointment of Scott Bessent.
The U.S. dollar is broadly softer at the start of the new week following weekend news Donald Trump had selected Scott Bessent as his Treasury Secretary, meaning we now have the CV of the man overseeing Trump's desire to raise import tariffs.
The Bessent pick is a clear nod to Wall Street experience, as Bessent is a well-known and successful hedge fund manager whom Elon Musk described as representing the status quo.
Musk is a disruptor and had some names he thought would be better at shaking things up at the Treasury, but it looks like the market doesn't share this appetite for risk.
The relief of Bessent's nomination is reflected in higher U.S. bonds and lower bond yields. This, in turn, is weighing on the U.S. Dollar.
"The hedge fund manager has been a proponent of free trade in the past. Thus, the fact that Trump is considering him for this position could mean that fears about Trump's tariffs are overdone," says Kathleen Brooks, an analyst at XTB.
If Bessent and Trump look to negotiate with the likes of China and Europe over trade, then there is less scope for the most extreme tariff scenarios to materialise.
If the USD eases back in the coming days, then so too would CAD.
An original version of this article can be viewed at Pound Sterling Live