This pair just broke out of its inverse head and shoulders pattern to confirm a reversal, but the upcoming BOE decision could still trigger a pullback.
Long GBP/CAD Idea
On its 4-hour time frame, it can be seen that GBP/CAD already surged past the inverse head and shoulders neckline around the 1.6750 minor psychological resistance.
Now breakout trades aren’t really my strongest suit so I’m holding out for a pullback instead. I’m not seeing any signs of correction, though, so I might have to wait a bit longer before pulling up the Fibs on the latest rally.
It seems that pound bulls are eager to place their long bets in anticipation of a BOE rate hike this week, but I’m thinking that we’ll see a “dovish hike” in which policymakers would warn that they’re not looking to tighten again anytime soon.
Another scenario is that doves still outnumber hawks in the MPC, which might lead to a brief dip for pound pairs before traders turn their attention to the next potential BOE hike.
As for the Canadian dollar, downbeat monthly GDP data and more cautious remarks from BOC head honcho Poloz would likely keep a lid on the currency’s gains. Poloz did mention that there are sources of uncertainty from inflation, wages, and household debt so it’s likely that they will take things slow from here.
I haven’t set entry orders yet since I’m waiting to see if a correction is underway. I’m hoping to get in on a pullback to the broken neckline around 1.6700-1.6750 but will also be ready to hop in at market if the dip is shallow.
The chart pattern is approximately 800 pips tall so I’ll look at a profit target of the same height and set my stop below the shoulders or 1.6300 for roughly 2:1 return-on-risk. What do you guys think?
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