The BOE Super Thursday and OPEC meeting rumors could prove to be strong forex catalysts this week so I’m looking at this long-term reversal pattern on GBP/CAD. I’m seeing a double top formation on the pair’s daily time frame, with a potential neckline breakdown looming.
As you can see from the chart below, the chart formation is a little over a thousand pips in height so the resulting selloff could be of the same size. The pair is still around a hundred pips away from testing the neckline support at 1.9900-1.9950 but I think today’s U.K. events could spur some volatility.
In addition, the OPEC special meeting scheduled this month is boosting oil prices on speculations that some member nations could urge for production cuts. If so, the positively-correlated Loonie could regain ground against its forex peers and a potential return in risk appetite could also boost the higher-yielding commodity currency.
For now, though, Arab states are still refusing to back down when it comes to production so I’m gonna have to keep close tabs on how their talks unfold. I’ll also be on the lookout for any strong moves during the BOE Inflation Report, ready to hop in with a small position if a downside break occurs.
Here’s my plan:
Short GBP/CAD around 1.9925 (0.25% risk), wide stop loss at 2.0325, profit target around 1.9000.
I’m going for a 2.3-to-1 return-on-risk on this trade for a potential 1.15% gain on my account, although I will consider adding another position and trailing my stop depending on the strength of the move. If you’re planning on joining me on this one, just make sure you take a look at our risk disclosure.
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