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GBP/CAD just broke below a major support area, and with top tier CAD data on the way, it could have more room to run.

Support Break on GBP/CAD

GBP/CAD Daily Forex Chart
GBP/CAD Daily Forex Chart

GBP/CAD has been on a tear lower since topping around 1.7700 between March and May. It’s a move that was likely driven by Brexit related drama/changes in U.K. leadership, and possibly on the positive surprises in Canadian economic data, most notably the strong run in Canadian employment (minus the most recent update) and the strength in inflation. These themes were enough for GBP/CAD to push past a major support area around 1.6600 – 1.6700, cutting through it like a hot knife through butter at the end of the June. And at the moment, I don’t see this themes drifting away in the near to mid term.

With the Bank of Canada set to make it’s latest monetary policy statement tomorrow, I think this move may continue to have legs lower because of the recent positive economic updates for Canada), but it’s likely we’ll see some volatility around the announcement as traders adjust risk (i.e., take profits, cut losses, etc.). So I’d like to short this pair, but I’ll do it conservatively just in case there is a bounce ahead or after the event.

My target entry is the broken previous support area, and my max stop is the weekly ATR of around 270 – 280 pips. My max target is the next major support area that held off the bears back in 2017. Here’s what I’m doing:

Short GBP/CAD at 1.6600, max stop at 1.6880, max target at 1.6000 with 1.00%

I’m only risking 1.00% of my account on this trade , and I’ve got a potential max return-on-risk of around 2.18:1. But with more top tier economic updates after the BOC event, it’s likely I’ll keep a close watch and close the trade down if necessary, especially if there is a profit.

What do you guys think? Let me know in the comments section below!

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