I’ve already got a trade on the Aussie and Kiwi so I’m turning my attention to the Loonie, especially since the BOC decision is coming up this week. Here’s what I’m seeing on GBP/CAD.
GBP/CAD Trade Idea
The pair has been trending lower since August last year, moving inside a descending channel connecting the latest highs and lows on the 4-hour time frame. Price has been hovering close to the channel resistance around the 1.6400 major psychological resistance for quite some time, hinting that buyers are still trying to push for a break higher.
We’ve got the BOC interest rate announcement coming up today and, even though no actual monetary policy changes are expected, policymakers could still express some concern about Canada’s consumer spending and business investment figures. After all, the central bank already projected that Q4 GDP growth would likely be weighed down by these factors and Governor Poloz recently mentioned that “a rate cut remains on the table and it would remain on the table for as long as downside risks [to inflation] are still present.”
On the other hand, any signs of relief regarding the Brexit debates in the House of Lords and the impending Scottish referendum could prove bullish for sterling as traders continue to stay hopeful that the U.K. economy can weather these uncertainties. Pound price action could be headline-driven as usual so I’ll be staying on the lookout for momentum in either direction.
I’m looking to go long past the 1.6500 handle and short if price drops sharply below the near-term consolidation support around 1.6200. This pair is usually volatile so I’m setting a wide stop of 400 pips and aiming for at least 1:1 return-on-risk if I’m able to enter. Don’t forget to check out our risk disclosure if you’re trading this one, too!
See also: Q4 2016 Trading Performance Review
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