GBPCAD is searching for a new floor
The May GBPCAD uptrend was broken with the move below the 1.9120-30 area and the new downtrend from the 1.9300 peak comes into play at 1.9080. GBPCAD is currently flirting with two week support in the 1.8990-1.9000 zone. A break of this area would lead to a steep drop to 1.8740.
GBPUSD traders have focused on Brexit polls for the past month or so and now that the “Stay” camp appears to have a healthy winning margin, the size of the recent GBPUSD rally leads one to believe that the bearish GBPUSD positions have been squeezed out.
This morning’s UK GDP data was a tad soft adding to the string of mildly weak data prints in May.
The renewed focus on US rate hikes combined with the high oil prices points to further GBPCAD weakness ahead
Management and risk description
This trade is vulnerable to a steep drop in oil prices. The stop will likely be triggered if Fed chair Janet Yellen surprises markets and delivers a dovish speech on Friday, contrary to the hawkish views of a number of Fed speakers in the past two weeks. Weaker than expected US data on Friday would also put the stop loss in jeopardy. GBPCAD has aready had a steep drop and we are advocating entering into a short position right on support, which could prove fool-hardy.
Trade idea parameters
Entry: Sell ½ position of GBPCAD at market (Currently 1.9006) balance 1.9080)
Time horizon: 5 days
GBPCAD 30 minute second with intraday support and downtrend noted.
GBPCAD 4 hour highlighting broken uptrend and target area.
GBPCAD 5 year daily with moving averages
— Edited by Clare MacCarthy
Non-independent investment research disclaimer applies. Read more