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Taking a short-term shot on GBP/CAD after the pair broke out of consolidation last week. Is there a pullback ahead to get in at a better price?

Short-term Support on GBP/CAD?

GBP/CAD 1-Hour Forex Chart
GBP/CAD 1-Hour Forex Chart

Thanks to falling oil prices and a fresh rate cut from the Bank of Canada to 0.25%, Loonie bulls area having a rough go recently. There doesn’t seem to be anything coming this week to likely change traders’ mind, so I’m looking to short Canadian dollars for a short-term play.

And I’m looking to do this against the British pound, which has had better luck this past week only because we have yet to see a bazooka of bond buying from the BOE, vs. the other major central banks who massively upped support of their respective financial systems.  It’s highly likely the BOE will make moves, but for now, they’re likely to wait and see how their recent rate cuts will affect the markets.

From a price action point of view, GBP/CAD broke above a week long consolidation area, roughly between 1.6700 – 1.7200. Now slowing it’s rally around the major psychological area of 1.7500, and showing a bit of divergence between the stochastic indicator and prices, a pull back opportunity may be in the cards for short-term players. If so, I’m looking to buy around the top of the previous consolidation area around 1.7100 – 1.7250, which could come soon given that area is within one daily ATR (around 320 pips) reach from current levels.

So, I’m looking to scale into a long position around that area on a pullback, and my stop will be one daily ATR from second entry area to give the trade room to breathe  My max target will be two times the daily ATR for a good short-term potential return-on-risk. Here’s what I’m going to do:

Long half position GBP/CAD at 1.7255, max stop at 1.6780 with 0.50% risk, max target at 1.7800

Long half position GBP/CAD at 1.7105, max stop at 1.6780 with 0.50% risk, max target at 1.7800

I’m only risking 1.00% of my account on this trade if both positions are triggered and I’ve got max potential return-on-risk of around 1.67:1.

What do you guys think? Are you watching GBP/CAD for a potential long position as well? Let me know in the comments section below!

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