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The channel support is still holding, you guys! Do you think I can catch a good return-on-risk if I try to hop in a long position at market?

Long GBP/CAD Idea

This pair looks ready to resume its uptrend as it found support at the bottom of the ascending channel visible on the 4-hour time frame. Applying the Fibonacci extension tool shows the next potential targets.

I’m thinking of jumping in at market (1.7550) for a long position, setting my sights on the swing high at the 61.8% extension as my initial profit target. However, I’m a bit concerned that stochastic is already indicating overbought conditions.

Then again, this could simply mean that the pair might be in for another dip to the nearby support zones. I’m thinking that another test of the support around 1.7350-1.7400 might be in order.

GBP/CAD 4-hour Forex Chart
GBP/CAD 4-hour Forex Chart

I’m Loonie bearish because the BOC also shifted to a less upbeat stance in their latest policy statement, joining the rest of the major central banks in being cautious of a global slowdown. Also, a potential top in crude oil might put weight on this correlated currency.

Meanwhile, I’m slightly bullish on sterling because of the Brexit extension granted by the EU. Although this doesn’t really remove the possibility of wreaking havoc on the U.K. economy sooner or later, it does lift some of the unease in the short-term. After all, this buys parliament more time to get its act together and allows the government to explore other options.

I do have to keep close tabs on the BOE Super Thursday events this week, though, as a dovish shift by the U.K. central bank could also spur losses for the pound. Then again, there are some reasons to stay cheery, such as the impressive pickup in retail sales and how inflationary pressures are staying afloat.

Additional volatility would likely kick in around the actual event, so I’m not too keen on setting entry orders just yet. Instead, I plan on watching price action unfold and trying to gauge what the BOE’s next steps might be.

If the channel support at 1.7350 holds, I could jump in at market and set my stop around 1.7225. I’ll roll my stop higher once price tests the 61.8% extension and then likely aim for the channel top or 1.8000 handle.

What do you guys think?


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