The trend might be my friend for GBP/CAD, as I spotted a falling trend line on its 1-hour forex time frame. What do you think of this simple setup?
The pair’s downtrend seems pretty strong, as price has been trending lower for a month and the pair has just broken through the 1.7950 minor psychological support level. However, a pullback might be in the cards, as this former support zone lines up with the 38.2% Fib and the trend line itself.
Stochastic is moving higher, indicating that pound bears are taking a break for now and suggesting that price could reach the Fibs before resuming its drop. I’m thinking of aiming for new lows since fundamental factors line up in favor of a short GBP/CAD forex trade.
For one, the growing possibility of Scottish independence is weighing on the pound, as this could lead to political and economic uncertainty in the United Kingdom. Heck, this issue was enough for the pound to ignore stronger than expected construction and services PMI reports this week! I wonder what the BOE statement will have in store…
As for the Loonie, the BOC’s decision to stick to its neutral stance has been received positively. Policymakers did emphasize that upcoming economic reports could be crucial in determining whether their bias is likely to change soon or not, which means that the Canadian dollar could be extra sensitive to data. Trade balance and jobs data are up for release towards the end of this week so I’ll keep close tabs on that.
I’m planning on shorting at 1.7950, with a stop above the 1.8000 major psychological level and a target at the next longer-term area of interest at 1.7500. I’ll be trailing my stop once price hits the previous lows near 1.7880.
As always, I’d love to get your thoughts on my trade idea!
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