Forex Trade Idea: GBP/CAD Trend Line Bounce

Guess what? I’m trading GBP/CAD again! My previous long position on this forex pair yielded pretty decent profits so I’m gonna hop back in the ongoing uptrend.

I’m seeing a textbook trend line pullback setup on this one, as the pair is currently testing the longer-term ascending trend line (visible on 4-hour and daily forex time frames) with a bullish divergence to boot. Price seems to be finding support at the rising support area, which is somewhere between the 50% and 61.8% Fibonacci retracement levels and coincides with the broken resistance around the 2.0600 major psychological mark.

GBP/CAD 1-hour Forex Chart

GBP/CAD 1-hour Forex Chart

The British pound suffered a nasty selloff earlier this week, most likely due to forex traders scurrying away from riskier holdings and putting their cash in lower-yielding currencies. However, the Loonie could be in a much weaker spot since crude oil prices have already slipped below the $40/barrel psychological mark and could be in for more declines.

Besides, the U.K. economy seems to be on much better fundamental footing compared to Canada.  I’m counting on the upcoming release of the U.K. second GDP estimate and quarterly business investment data tomorrow for a GBP/CAD bounce since this might remind market watchers that the U.K. ain’t doing so bad. Aside from that, I’ll be keeping close tabs on commodity price movements to gauge if Canada’s energy sector could face worse headwinds in the coming months.

What do you guys think of this forex setup? Think I can add to my recent wins on EUR/NZD and USD/CAD?

Cheers,

Happy time

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