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Now that the BOE shifted to a less hawkish bias, I’m looking to short the pound against a currency that’s supported by more rate hike expectations. Here’s what I’m seeing on GBP/CAD.

GBP/CAD Trade Idea

A descending channel seems to be forming on this pair’s 4-hour time frame as price turned from the 1.6700 resistance and is setting its sights back on support around 1.6100.

The BOE’s less upbeat statement and Inflation Report was mostly to blame for the drop since fewer members voted to hike interest rates this time. In addition, the central bank downgraded its growth forecasts.

Stochastic is also heading south, which means that pound bears are getting back in the game. I’m seeing a bit of consolidation, though, so I’m thinking sellers might be waiting for more catalysts before pushing lower.

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

For today, we’ve got the Canadian jobs report up for release and analysts are expecting to see slower jobs growth of 11.7K compared to the earlier 45.3K jump. This should still be enough to keep the unemployment rate unchanged at 6.5%.

Canada is also set to report its trade balance and might print a larger deficit of 1.3 billion CAD from the earlier 1.1 billion CAD shortfall. Weaker export growth might dampen the Loonie’s gains, especially if traders start speculating that the BOC might blame the currency’s appreciation for slower trade activity. The Ivey PMI is also due and a lower reading is eyed.

All eyes and ears are also on the OPEC meeting next week since this could have a significant impact on crude oil prices. The commodity is currently testing major inflection points so the outcome of the cartel’s huddle could have a strong say in its longer-term direction. Last time I checked, Saudi Arabia is widely expected to push for better compliance in the output deal among member nations.

I’m planning on setting sell stop orders to catch bearish momentum if it does show up on stronger than expected data from Canada. An entry below the 1.6500 consolidation area could be enough to get me in a short position until the channel support but I’m open to rolling my stop from above the 1.6700 mark down to entry once price tests the recent lows at 1.6300. What do you guys think?

Cheers,

Happy

See also: Q2 2017 Trading Performance Review

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