Kay Van-Petersen
Kay Van-Petersen, macro strategist at Saxo Capital Markets, digests the market action seen in week 43 and gives his tactical positing. Van-Petersen favours a USD step back, sees gold consolidating, and believes that European equities are overheated.
Day trade
Trade view / 07 July 2016 at 12:32 GMT

GBPCAD bounce may just be a correction

FX Consultant / IFXA Ltd

The GBPCAD downtrend line has been tested often in choppy trading following the Brexit vote but it has maintained its integrity. GBPCAD touched 1.6692 on the news that at least three commercial property funds were suspending trading and following Bank of England governor Mark Carney’s hints of additional easing.

GBPCAD has since rebounded back to the downtrend line which may be a selling opportunity.
FX markets have spent the past three days in a “risk-off” environment. Yesterday’s larger-than-expected draw-down in US weekly crude stocks as reported by the American Petroleum Institute, may have helped shift risk sentiment to a more positive outlook. That shift may be validated later today if the EIA crude stocks reports shows the same size of drawdown.

Today’s Ivey PMI report, although volatile, may provide additional support to the Canadian dollar.
The bearish GBPUSD outlook and an improved risk tone argues that today's  GBPCAD rebound is merely a correction and a revisit to week’s low is likely.
Management and risk description  

There are a lot of risks to this trade. USDCAD is in an uptrend and while trading above 1.2900, the current USDCAD selloff is merely a correction. GBPUSD is vulnerable to huge price swings which can trigger the stop.

The trade is vulnerable to weaker than expected Canadian data. GBPCAD has already moved substantially exposing the stop loss on this trade to a profit taking rally . 

Trade idea parameters

Entry: Sell ½ position of GBPCAD at market (currently 1.6870) Balance at 1.6930 
Stop: 1.6962
Target: 1.6610 (76.4% Fibonacci and Fibonacci retracement of April 2013–July2016 range
Time horizon: 3 days

GBPCAD 30-minute with stop loss highlighted
 Source: Saxo Bank 

GBPCAD 4-hour with downtrend channel
 Source: Saxo Bank 

GBPCAD 5-year daily with moving averages and Fibonacci target
 Source: Saxo Bank 

— Edited by Clare MacCarthy

Non-independent investment research disclaimer applies. Read more
07 July
Michael O'Neill Michael O'Neill
UPDATE: This trade idea worked out rather well. Some times a little luck is all you need. The modestly better-than-expected Canadian data, as dodgy as it is spooked this weeks class of USDCAD bulls who are all hoping that the EIA data doesn't lead to further USDCAD selling this afternoon.

In reality, I believe that the range for the past 24 hours was merely pre-payrolls position jockeying and not much else.

Nevertheless, when the FX gods smile upon you, it is good to smile back.

Close the trade at the current market (1.6725)and book a 0.0145 point gain for a few hours effort.

Note: the second sell order was not filled.
07 July
fxtime fxtime
Good call...and thx :-)


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