It looks like the commodity currencies are back with a vengeance these days, with reversal patterns popping up all over the forex charts. GBP/CAD already broke below its head and shoulders pattern but I’m still hopeful I can hop in this quick correction.
As you can see from the pair’s 4-hour forex chart below, price seems to be making a pullback from its breakout move and might be ready to retest the broken neckline support around the 2.0150 minor psychological level. This is right smack in between the 50% and 61.8% Fibonacci retracement levels, which might serve as good entry points for a short trade.
The British pound seems to be in for more downside, as the latest BOE statement revealed that policymakers are feeling less upbeat these days. Compared to their earlier announcements suggesting that a rate hike might take place early next year, yesterday’s rate decision and meeting minutes seemed to suggest that their weak inflationary outlook would lead them to delay any potential tightening moves.
Recent economic reports from Canada have been mixed and the country is still gearing up to release its September jobs report later today so I haven’t set any entry orders just yet. So far, it looks like the pickup in oil prices is supporting the positively-correlated Loonie and might continue to do so if risk appetite stays in the forex market.
If I’m able to catch a nice pullback entry on this one, I’ll be aiming for an 800-pip profit target or almost the same height as the head and shoulders chart pattern. I’m thinking of setting my stop just past the swing high at 2.0400 or the shoulders at 2.0550.
Think my plan could work? As always, I’d love to read your feedback on my forex trade ideas so keep ’em coming!
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