Trade view /
07 July 2016 at 12:32 GMT
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
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
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