This week, I’m taking a look at GBP/CAD with top tier potential catalysts coming soon from both the U.K. and Canada this week. Will the range hold if retested?
Range Play on GBP/CAD?
On the forex calendar ahead, we’ve got the latest monetary policy decision coming from the Bank and England and top tier economic data from Canada on Friday to likely shake up the action in GBP/CAD.
And with the odds rising of the Bank of England turning up simulative measures in the face of another U.K. lockdown, against potentially positive updates from Canada’s business sentiment and jobs report (based on a positive update from IHS Markit’s latest PMI read), I’m leaning bearish in my bias on GBP/CAD at the right price.
I believe that right price is right around the top of the range in the pair, one that goes back to September. On the four hour chart above, we can see bulls have held the line right around the 1.6900 – 1.6950 area, while the bears have been able to take back control of the market right around the 1.7250 – 1.7300. That latter area of interest is where I look to jump in if retested.
Given the high level of importance of both events, I will be a bit conservative with my entry by going with a half position and a relatively wide stop to start. Depending on what we get from both countries, and the market’s reactions, I may increase the position size if it makes sense. But for now, here’s what I’m doing:
Short full position on GBP/CAD at 1.7300, max stop at 1.7460 with 0.50% risk, max target at 1.6970
I’m only risking 0.50% of my account and I’ve got a solid potential return-on-risk of over 2.05:1 to start. I plan on adding to this trade/rolling down my stops if the we do see bearish price action paired with a dovish fundamental situation for the pair.
And of course, if the story changes for either currency, I’ll be sure to cut the trade/orders away quickly and move on to the next one. If my orders are not triggered by the end of the week, I will cancel them and move on to a new idea.
Be sure to manage your risk and avoid overexposure.
What do you guys think? Are you watching GBP/CAD for a potential short position as well? If so, what’s your entry strategy and risk tolerance? Let me know in the comments section below!
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