Pound pairs have been tanking again, but it looks like GBP/CAD is still in correction mode so I’m watching these retracement levels closely. Think the selloff could resume for this pair?
GBP/CAD Trade Setup
This textbook pullback setup on the pair’s 4-hour time frame is looking really neat, as the pair has yet to test the nearest Fib and might even pull up to the broken support around the 1.6650-1.6700 area, which is closer to the 50% retracement level. Stochastic is already turning lower, which means that sellers are eager to push GBP/CAD back down to the swing low, but fundamentals are suggesting otherwise.
For one, crude oil has been returning some of its recent gains as oil-producing nations no longer seem to be as willing to pursue an output deal as they used to be. Iraq, which is the second-largest oil producer next to Saudi Arabia, has stated that it can’t cut production to comply with any OPEC restrictions because of geopolitical tensions in the area. Just recently, Russia seemed to backpedal on its support for an OPEC deal when its envoy mentioned that output cuts aren’t an option for the country.
The situation could still change as the official OPEC meeting in November 30 draws near, giving the oil-related Loonie room to recover and take advantage of longer-term pound weakness, especially since BOC Governor Poloz has clarified that they’re not looking to cut rates anytime soon.
In contrast, the U.K. economy has bigger problems on its plate with Brexit uncertainties and all. The upcoming preliminary GDP release this week could lead to a pop higher for this pair if the results come in stronger than expected, possibly spurring a larger correction to the area of interest.
For now, I’m just gonna be on the lookout for headlines that could put GBP/CAD on the southbound route again and I’ll keep y’all posted if I’m setting entry orders already. As always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.