Sterling has been blasted lower after BoE governor Carney cast doubt on a previously pretty-much-expected UK May rate hike. The EU's rejection of Britain's latest Brexit-Irish border plan only served to deepen the rot.
Short term
Trade view / 03 August 2016 at 10:58 GMT

BoE may burst GBPCAD balloon

FX Trade Strategist /
Instrument: GBPCAD
Price target:
Market price:

GBPCAD has traded within a 1.6675-1.7600 range since Brexit and it is now flirting at the top of the band.  

The Bank of England hinted at stimulus action for the July meeting and then didn’t deliver. They are widely expected to announce a 25 bp. rate cut tomorrow, on August 4. GBPUSD rallied from 1.3160 on August 1 to 1.3360, in part because of sentiment suggesting that a BoE rate cut was 100% priced in. 

The BoE is expected to announce a rate cut, a QE extension and some credit easing according to JPMorgan analysts with a risk of a bigger rate cut than expected. If correct, GBPCAD will revisit the bottom of the range.

The technical justification for this trade idea is very weak although the stochastics and RSI’s suggest that GBPCAD is getting over-bought. However, long term Fibonacci retracement projections target 1.6592 which represents the 76.4% retracement level of the March 2013-July 2016 range.
Management and risk description 
This trade is vulnerable if the BoE is deemed to have disappointed markets. It is also vulnerable to a further drop in oil prices. This trade is not supported by any intraday technicals. In fact, the technicals are bullish. This trade is predicated on the assumption that the July August range remains intact.

Trade idea parameters

Sell ½ GBPCAD at market (currently 1.7540) balance at 1.7590

Stop: 1.7630
Target: 1.7030
Time horizon: 3 days

GBPCAD 1 hour with stop loss level shown

Source: Saxo Bank. Create your own charts with Saxo Trader click here to learn more

GBPCAD 1 hour with Stochastics and RSI
Source: Saxo Bank 

GBPCAD 4 hour with trading range noted
 Source: Saxo Bank 

GBPCAD weekly with Fibonacci
gbpcad  Source: Saxo Bank 

— Edited by Clemens Bomsdorf

Non-independent investment research disclaimer applies. Read more
Michael O'Neill Michael O'Neill
UPDATE: Lower stop loss to 1.7460, guaranteeing close to .0080 point profit, depending how the BoE decision goes.
Michael O'Neill Michael O'Neill
GBPCAD chart to support above update
Estuardorlemus Estuardorlemus
Thanks for the update Mike.
brian1983 brian1983
so bearish abt the gbp?
Estuardorlemus Estuardorlemus
Any update Mike?
Michael O'Neill Michael O'Neill
The target was very aggressive. At the moment the trade is sitting on a gain of over 0.300 points.
Take the profit and reevaluate
Estuardorlemus Estuardorlemus
Thank you for that quick response , good call on this one!


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