- GBP/CAD supported at 1.73

- Could break above 1.76 this week.

- As CAD struggles ahead of OPEC meeting.

- While Brexit saga nears resolution.

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GBP/CAD spot rate at time of writing: 1.7345Bank transfer rate (indicative guide): 1.6721-1.6842FX specialist providers (indicative guide): 1.7067-1.7171More information on FX specialist rates here The Pound-to-Canadian Dollar exchange rate trade 0.22% higher on Monday at 1.7345 as buyers return to the market following the 0.68% decline recorded last week.

A further extension of this early strength is possible in the coming days as the Canadian Dollar contends with a variety of headwinds and the Brexit saga nears at least a temporary resolution.

Pound Sterling was pummelled on Friday, making it one of the worst performing major currencies on the day after Prime Minister Boris Johnson spoke of "important differences" remaining in the Brexit negotiations, which discouraged the market from its optimistic view that a deal could be in the pipeline.

Meanwhile, a strong week for stock markets and oil prices led the Canadian Dollar to gain over many lower yielding currencies, although its proximity to the U.S. and its economy that is increasingly encumbered anew this month with fresh coronavirus-related restrictions led the Loonie to underperform against other commodity currencies.

The net effect was a Pound-to-Canadian Dollar rate slide back to the 1.73 handle, in what was one of the lesser declines endured by Sterling exchange rates. However, GBP/CAD enjoys notable technical support around this level and could be due a recovery rally over the coming days if a Brexit trade agreement is announced.

"Trend signals are aligned bullishly—but still relatively weakly—across the short, medium and longer term timeframes. Longer run charts highlight the solid support the GBP has found on weakness in the past three months," says Juan Manuel Herrera, a strategist at Scotiabank. We think the cross should remain well supported on minor dips (to the upper 1.73s) now and look for gains to progress towards 1.7600/50."

Above: Pound-to-Canadian Dollar rate shown at daily intervals with 200-day moving-average in pink.

Recent indications are that all which remains to be determined in the Brexit talks are terms of an agreement on fisheries access, which was the main focus of both the Prime Minister's recent statements as well as comments made by Foreign Minister Dominic Raab in an interview with Sky News on Sunday.

This is positive for the Pound, especially in light of a planned meeting of EU ambassadors on fisheries this Monday. The two sides have less than a fortnight to reach an agreement.

A Brexit trade agreement could lift the GBP/USD rate to 1.35 as a minimum, according to a range of analyst estimates, which would lift the Pound-to-Canadian Dollar rate to 1.7550 if USD/CAD remained around Friday's 1.30 level. However, if strategists at Commonwealth Bank of Australia (CBA) are right with their forecast for a GBP/USD rate of 1.36 then GBP/CAD would be lifted above the 1.76 level while the 1.40 prospect flagged by Markets.com would lift GBP/CAD to a new 2020 high of 1.82 if seen.

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These possible levels for GBP/USD are significant enough to mean that Canadian Dollar price action itself could have little bearing on GBP/CAD this week. That's unless one of the multiple risk events, ranging from job and GDP data to the lates Organization of Petroleum Exporting Countries (OPEC) meeting, leads to Canadian Dollar weakness.

"CAD’s exposure to US sentiment has proved detrimental as the loonie failed to follow other procyclicals in another decent rally this week. The US contagion and data narrative will remain an important factor for CAD," says Francesco Pesole, a strategist at ING. "Next week will be a pivotal one for oil prices as the OPEC+ meets and an extension to output cuts will be discussed. Our commodities team thinks the balance of risks for oil is tilted to the downside ahead of the meeting."

ING's Pesole looks for USD/CAD to trade between 1.2880 and 1.3080 this week, before going on to end the year around Friday's level of 1.30, leaving the GBP/CAD rate as largely a Brexit trade between now and the end of December.

Above: USD/CAD rate shown at daily intervals with 200-day moving-average in pink.

"A clear and sustained close beneath the crucial “neckline” from the January and the September lows at 1.3009/2994 would finally see a very large “head and shoulders” top completed," says David Sneddon, head of technical analysis at Credit Suisse. "Support is seen subsequently at 1.2985, ahead of the 78.6% retracement of the 2018/2020 surge at 1.2976/72, with the 1.2952 the final barrier to an aggressive trending move lower."

Canada's Dollar remains sensitive to the trajectory of the U.S. Dollar as well as investors' appetite for stocks and commodities, which may all be tested this week by the creeping spread of renewed albeit lesser restrictions on activity in some parts of the U.S. this week. Oil prices will also be interested in the outcome of Monday's OPEC meeting, which will decide on whether to go for a three-month or six-month extension of earlier emergency production curbs designed to lift oil prices from pandemic lows.

"The loonie continues to be pushed and pulled by currencies moving versus the USD, leaving CAD stronger against the greenback over the past month. At 1.30, the C$ is firmer than levels that have historically been consistent with supporting Canadian export growth. With oil prices unlikely to return to earlier heights, that has the C$ starting at an overvalued level on trade fundamentals," says Katherine Judge, an economist at CIBC Capital Markets, who forecasts a USD/CAD rise to 1.32 by March.

Any market unease over the U.S. coronavirus situation or disappointment with the outcome of the week's OPEC meeting could lift USD/CAD and help to underpin a recovering Pound-to-Canadian Dollar rate over the coming days. However, Canada's Dollar could also take some of its cues from Tuesday's September GDP data and Friday's employment figures for November, which are released alongside the U.S. non-farm payrolls report. The data are out at 13:30 on the respective days.

"From household goods consumption to residential construction to business investment, economic activity looked far less distorted in the quarter," says Royce Mendes, a CIBC colleague of Judge's, who looks for a 0.9% increase in September GDP and annualised 48.1% rebound for the quarter overall. "The labour market was able to outrun the pickup in virus cases for longer than anticipated, but it’s likely that Covid caught up with Canadian employment in November. Our forecast that the economy shed roughly 10K jobs during the month takes into account public health restrictions implemented in late October and early November, but does not include the latest lockdowns."

Above: Pound-to-Canadian Dollar rate at weekly intervals with selected moving-averages.