Bounce or break? GBP/CAD is hovering around a key resistance area, which could either be the neckline of a double bottom or the top of a range depending on what the BOE does.
GBP/CAD Trade Setup
BOE Governor Carney and his fellow policymakers are set to announce their rate decision in today’s London trading session and analysts still seem to be divided on what the U.K. central bank might say. Some expect to see additional stimulus after Carney gave dovish hints during the Inflation Report hearings last week while others think that the MPC could sit on its hands for now and wait for their August stimulus moves to kick in.
A less dovish statement and the lack of commitment to additional easing down the line could allow GBP/CAD to make a convincing break past the 1.7500 major psychological resistance, confirming the double bottom reversal signal. This could take the pair up by around 800 pips or the same height as the chart formation.
On the other hand, more stimulus or a stronger dovish bias could allow the ceiling to hold, pushing GBP/CAD back to the bottom around the 1.6700 handle. Stochastic is making its way close to the overbought area to indicate weakening bullish pressure, and a turn lower could draw sellers to the game.
Economic reports from the U.K. (CPI and claimant count) have been mostly weaker than expected, although the average earnings index did post an upside surprise. Meanwhile, the Loonie has been looking pale despite the draw in U.S. oil stockpiles as market participants are expecting higher output levels later on.
I haven’t set actual entry orders yet since I’m planning on waiting for the BOE statement and MPC meeting minutes to pan out before jumping in. The chart pattern is pretty large anyway so I can afford to wait for a bit more momentum while still going for a decent R:R. I’ll be long-biased on a climb past the 1.7600 mark and short-biased on a move below 1.7400.
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See also: Q2 2016 Trading Performance Review