We’ve got a quick update to a previous GBP/CAD consolidation pattern posted earlier this week and EUR/USD forms a rising channel that could be setting up a short play!
Looks like I was a bit wrong in my Monday post about leaning to the downside on GBP/CAD. After a surprise announcement from British PM Theresa May about a snap election, it was all upside for Sterling and now its time to shift with the changing picture.
With the breakout now formed and the stochastic heading into overbought territory, the conservative practice would be to wait for a possible pullback and retest of the 1.6700 area. For all you more aggressive FX traders out there, going long now is not such a bad idea if you think this is just the start of a longer-term return of Sterling dominance.
The next potential resistance level isn’t seen until the 1.8000 area (mid-2016 strong support) and after that, the 2015 highs around 2.0900 makes for a very, very nice return-on-risk that’s hard to ignore.
Today’s daily chart could be an argument for both the bulls and the bears, depending on what you’re looking at.
For the bulls, we’ve got the pair bouncing off of the bottom of a rising channel forming, or at the very least, a sequence of higher lows forming a textbook trendline that the bulls may be hopping into. With broad dollar weakness in recent sessions, this may be a confirmation move to the upside or even a full shift to USD bearish sentiment.
For the bears, we’ve got both the 100 and 200 SMA‘s pointing lower, indicating that the trend lower is still intact. And if that’s the case, the top of the rising channel could be a potential bearish entry sellers may be watching for resistance, or that rising trendline connecting the lows is the line in the sand to short if it’s broken with momentum.
Which ever side you pick, remember that risk management comes first! Good luck and trade safe!