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The British pound maintains a constructive setup against the Canadian dollar.
The pound to Canadian dollar exchange rate (GBP/CAD) rises to its highest level since late October on Monday at 1.8689.
Gains mirror a rise in GBP/USD, which is linked to fears about the future of Federal Reserve independence in the wake of the U.S. administration's legal proceedings against the Central Bank.
Markets start the new week ingesting the surprise move by the U.S. Justice Department to threaten legal action against the Fed and its Chairman Jerome Powell.
The moves are part of President Donald Trump's efforts to bring the Fed into his orbit, which radically undermines the central bank's independence.
Since the start of Trump's second term, we have seen CAD prove responsive to USD action, and that's the case today: GBP/CAD rises to new highs in sympathy with the boost to GBP/USD.
This opens the door for a rally to the 1.8715 zone, which we forecast to be an approximate area of resistance.
Technical studies favour further GBP gains against CAD owing to the exchange rate being positioned above both the nine- and 200-day exponential moving averages.
The Relative Strength Index (RSI), the bottom panel in the chart, is positive at 64 and is pointing higher, confirming to us that momentum is to the upside.
For now, we'd look for higher levels to arrive in the coming days and once that target of 1.8715 is reached, we'll reassess by looking for signs of consolidation.