Heads up, pound bulls and Loonie bears! We’ve got a reversal chart pattern on GBP/CAD’s long-term time frame, and it looks like we’re getting bullish confirmation, too.
Long GBP/CAD Idea
I spy with my one good eye this double bottom formation on the pair’s daily time frame. Unless I need a new single-lens prescription, I think I’m already seeing a tiny upside break from the neckline around the 1.7900 major psychological mark.
Stochastic looks ready to turn down from the overbought zone, though, so a quick pullback to the broken neckline might take place before the rally gains traction.
The chart pattern is approximately 2,000 pips tall so the resulting uptrend could be of the same height.
I’m Loonie bearish due to a nasty combination of factors that aren’t looking too good for the Canadian economy. For one, there’s the turn in crude oil as U.S. stockpiles are expected to keep rising on higher production from increasing oil rig counts.
Even though the Trump administration could give exemptions for Canada in imposing higher tariffs on steel and aluminum imports, there’s no denying that there’s still some tension in NAFTA negotiations. This means that Canada’s trade activity ain’t out of the woods just yet!
This also explains why the BOC had some hints of caution in their latest policy statement, citing that the Donald’s policies pose a lot of uncertainty. To top it all off, resurfacing global tightening prospects also tend to weigh on risk-taking, dragging the higher-yielding Loonie lower.
Sterling has some issues to grapple with also, but it looks like the “Keep calm and carry on” mood is prevailing among Brits. PM May sought to reassure the general public that the post-Brexit EU relationship could still be beneficial for businesses and their overall economy.
Besides, U.K. fundamentals remain mostly upbeat, with the services sector PMI beating expectations in February. CPI has also been going steady, keeping the odds of a BOE hike in play.
I haven’t set any entry orders yet since there could be time to wait for a bit more bullish action before hopping in. Or do you think I should put in a small position at market?
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