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Ian Coleman - First 4 Trading
Ian Coleman of First4Trading.net explains in a technical analysis of charts why he is trading GBPCAD. Coleman is looking to buy GBPCAD at 1.7155. His stop is 1.6850 and his targets are 1.8250 and 1.8480.
Short term
Trade view / 29 August 2016 at 12:27 GMT

Rate hike fever may weigh on GBPCAD

FX Trade Strategist / www.Loonieviews.net
Canada
Instrument: GBPCAD
Price target:
Market price:
Background

The GBPCAD bounce from mid-August, peaked at 1.7155 and the current price action is threatening the uptrend line from the August 16 low. A move below this line suggests a revisit of the low. The intraday technicals are bearish below 1.7050.

There is a lot of data this week which could help this trade. Weaker than expected UK data, particularly Markit PMIs on Thursday combined with better-than expected Canada GDP on Wednesday (June forecast 0.4%) and steady to firmer WTI prices should undermine GBPCAD.

In addition, the prospect of a US rate hike in September is arguably worse for GBPUSD than USDCAD. The UK is cutting rates and expected to announce additional stimulus measures.  For Canada, a US rate hike implies a strengthening US economy which is good for Canadian exports and by default, the Canadian dollar.

Management and risk description

This is a risky trade. The fundamental rationale for the idea is a tad sketchy as it is based on hope. Hope that UK data is soft and hope that Canadian data is strong. The stop will be triggered if the Canadian data is weak and the UK data is strong. In addition, a drop in WTI will trigger the stop.

Trade idea parameters

Sell ½ GBPCAD at market (1.7020) balance 1.7060

Stop: 1.7103.

Target: 1.6830.

Time horizon: 5 days.


GBPCAD 30 minute showing intraday uptrend line breaking

gbpcad
Source: Saxo Bank

GBPCAD 4-hour highlighting Fibonacci retracement levels
gbpcad
 Source: Saxo Bank
 
GBPCAD 5-years daily with moving averages.
gbpcad
 Source: Saxo Bank


— Edited by Martin O'Rourke

Non-independent investment research disclaimer applies. Read more
1y
AyersRock AyersRock
Hi Michael. I think stop can not be at 1.7003. This level is lower than 1.7020 and 1.7060
1y
Martin O'Rourke Martin O'Rourke
AyersRock, good spot! I'm checking with Michael now
1y
Philidor Philidor
Says 1.70911 on his chart, on that green line.

Coffee first, Mike. Especially on Mondays :)
1y
John Roberti John Roberti
dear Michael, You are now believing that USDCAD will revalue while GPB would devalue. But last week, you thought that Cad would devalue due to weaker Wti and god Jackson hole presentation.. I did not use your stop loss because I was afraid of immediate volatility but the final move to 1,31 was a good one Thus my question: what do you think now of the cad move? would it go to 1,32 or decline again? I have difficulties to envisage a upward movement in WTI and poor data on us side! Your opinion always appreciated
1y
Michael O'Neill Michael O'Neill
Sorry all: They stop loss is 1.7103 (it allows for a spike above the resistance line.
1y
Michael O'Neill Michael O'Neill
I have had three coffees, so far. Maybe too many?
1y
Martin O'Rourke Martin O'Rourke
And stop loss now fixed within the copy!
1y
izwansamba izwansamba
Tq mike
1y
Michael O'Neill Michael O'Neill
Hi John: sory if I confused you. USDCAD is rangebound within a 1.2650-1.3250 It is struggling to crack thside resistance at 1.3030-60.If this week's Canadian data surprises to the upside (June GDP) it will take stop of the sting out of US rate hike fears. GBPUSD has all the Brexit issues to deal with. The market short have been squeezed and the weak ones may be gone which if correct, will keep downward pressure on GBPUSD. Meanwhile GBPCAD charts are somewhat bearish
1y
yuiyui yuiyui
four coffees
1y
Michael O'Neill Michael O'Neill
Haha :( Forget coffee-Alcohol
1y
yuiyui yuiyui
at least not in that order...

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