Watching New Highs on GBP/CAD

Good afternoon forex friends!  GBP/CAD just made new highs on broad Canadian dollar weakness.  Is it a break out or fake out?!

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GBP/CAD 4 hour forex chart

GBP/CAD 4 hour forex chart

I just added GBP/CAD to my watchlist as this market made new highs thanks to the weak Canadian data today (both CA trade balance and Ivey PMI came in weaker-than-expected on the forex calendar).  Traders are taking this as another signal that Canada continues to be viewed as weaker than its major counterparts, as priced in over the last several months.

GBP/CAD is breaking above recent highs made on Dec. 30th, but I’m hesitant to jump in on the break.  First, it’s Non-Farm Payroll week with an Bank of England meeting to boot, and based on my reviews of my trade journal, it’s way too tough to weather the volatility without some very wide stops.

Second, in the past month or so, this pair hasn’t been able to make clean breaks of previous highs, so I think it’s a good idea to wait for what will be a likely pullback.

My plan is to see what we get from the BOE’s Monetary Policy committee this Thursday which according to Forex Gump’s blog post, may likely be no change to interest rates or asset purchase policies. Of course, any adjustments to their forward guidance may spark a market reaction for sterling.

So for now, I’m in wait-and-see mode with 1.7550-1.7600 as my potential buy area if there are no changes to the story.

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