Taking a look at GBP/CAD this week with top tier economic events from both the U.K. and Canada this week. Will volatility pick up and the uptrend continue?
GBP/CAD Uptrend Fib Setup
This week, I’m checking out GBP/CAD as we’ve got top tier catalysts head for both currencies. First, we’ve got the latest monetary policy statement from the Bank of England on Thursday, followed by the latest unemployment numbers from Canada on Friday.
The Bank of England is not likely to make changes to monetary policy, given that they made moves at their last meeting and we haven’t really seen any new shocks to the economy.
But with the possibility of new U.K. lockdown measures ahead to battle the rising COVID-19 cases, there is some possibility of dovish rhetoric that should be considered as a very low probability scenario. Overall, Sterling is likely to maintain its recent outperformance until conditions change.
As for the Loonie, it’s been a relative underperformer and could continue to do so with expectations that we’ll see weakness in Canadian trade and business sentiment this week. But the main event for the Loonie is on Friday with the latest employment update, which could surprise the markets once again with another strong update.
With all of those events in mind, I’m leaning to stick with the trend higher in GBP/CAD, but would like to do so on a pullback. It’s possible we could see some profit-taking from the recent Sterling rally ahead of the BOE event, or maybe even some Loonie strength at the end of the week.
I’m setting an opening order at the Fibonacci retracement area as other technical traders may see it as a potential support area to jump into if retested.
Since this is a swing trade, I’m using the weekly ATR as my max stop guide, and my max target will be two times my risk, with the possibility of adding to the position if goes my way. Here’s what I’m doing:
Long half position on GBP/CAD at 1.7350, max stop at 1.7140, max target at 1.7790
I’m only risking 0.50% of my account and I’ve got a solid short-term potential return-on-risk of over 2.09:1 to start. If triggered, I plan on adding to this trade/rolling up my stops if the pair rallies higher to maximize my potential gains/reduce risk, if the market themes down the road still dictate a bullish case.
Be sure to manage your risk and avoid overexposure.
What do you guys think? Are you watching GBP/CAD for a potential long position as well, or do you see a drop coming soon? Let me know in the comments section below!
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