GBP/CAD is a very strong candidate for a range breakout play with inflation updates ahead from both the U.K. and Canada. Will the top tier economic updates get the pair into momentum mode?
Consolidation Break Ahead on GBP/CAD?
We’ve got a short-term setup in the works for a potential news play on GBP/CAD. Coming around in Wednesday’s trading session, we’ve got the latest inflation updates from both the U.K. and Canada, top tier economic catalysts for most major currencies. Expectations are that the U.K. will log in a way high 2.6% read in August, while Canada is expected to post a lower-than-previous read of 0.1%.
If that scenario plays out, it’s possible traders could come in to pump up the British pound against the majors, a reaction that grows more probable with GBP/CAD if Canada’s inflation data comes in below 0.1%.
In this case, we’ll be watching for an upside break of the previous swing higher area around 1.7600 that some traders may view as a resistance area at the moment. A shift in that sentiment for that area could quickly turn into an upside momentum move.
If we see the opposite scenario of a disappointing U.K. inflation read while Canada surprises much higher, then a downside break of the consolidation pattern may be in the cards. We’ll watch for the market to trade below 1.7500 and hold before considering a position short.
And since this scenario would be a big surprise from expectations, this also has better odds of turning into an extended move, which could take the pair to 1.7400 within the session, based on the daily ATR of around 95 pips.
What do you all think? Will the inflation numbers surprise traders tomorrow? Will we see an upside breakout or a short-term to play out? Let me know in the comments section below!
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