Forex Trade Idea: Short-Term GBP/CAD Retracement

Now that GBP/CAD just broke below the long-term double top neckline, I’m hoping to catch the forex downtrend with this textbook break-and-retest play!

First off, here’s the daily reversal pattern I’m talkin’ about:

GBP/CAD Daily Forex Chart

GBP/CAD Daily Forex Chart

Expectations of a possible deal on crude oil production caps from OPEC and non-OPEC nations and downbeat data from the U.K. combined forces to push for a downside break of the neckline around the 1.9900 handle, confirming that a longer-term selloff may be in order. I zoomed in to the 1-hour forex time frame to spot a potential entry area:

GBP/CAD 1-hour Forex Chart

GBP/CAD 1-hour Forex Chart

Applying the Fib tool on the latest swing high and low shows that the 50% retracement level coincides with the broken double top neckline at 1.9900, which might now hold as resistance. The risk-off vibes in the financial markets could be enough to bring price all the way up to these Fib levels, but more attempts to come up with a coordinated plan to boost oil prices might still keep the Loonie supported in the near-term.

I haven’t set any actual entry orders yet since I’m willing to wait for more confirmation from reversal candlesticks around the Fibs before hopping in. I’ve got my one eye set on the 1.9900 area, with a wide stop past the swing high and an initial profit target at the previous lows near 1.9500. That should give me an initial 1:1 return-on-risk but I can also consider adding to my position or trailing my stop if fundamentals continue to rule in this trade’s favor.

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