Short term
Trade view / 22 August 2016 at 14:20 GMT

Squeezing shorts in GBPCAD

FX Consultant / IFXA Ltd

The post-Brexit rally in GBPCAD capped at 1.7535 on August 3 and then the downtrend resumed. That downtrend ended with the move above 1.6730 last week and the currency pair consolidated within a 1.6710-1.6880 range.

Today’s move above 1.6880 supports the intraday uptrend line that comes into play at 1.6850 and suggests further gains toward 1.7250.

British prime minister Theresa May is rumoured to favour triggering Article 50 in April 2017 according to Bloomberg, while an earlier article in the Independent pegged the date sometime in the autumn.

Until a decision gets made, GBPUSD may just consolidate within the confines of its post-Brexit vote.

GBPUSD short positions as reported by the Commitments of Traders Report are at record levels. A short squeeze is a definite possibility.

Oil prices have slid which has undermined the Canadian dollar.

The break of the intraday downtrend in an oversold GBPCAD environment suggests that further GBPCAD gains are possible.

Management and risk description 

This trade is vulnerable to stronger-than-expected US economic data increasing support for a September rate increase. It is also vulnerable to increased expectations of a hawkish Janet Yellen speech at Jackson Hole.  

The stop will also be triggered by weaker than expected UK data.


Entry: buy ½ GBPCAD at market (1.6930) balance at 1.6880

Stop: 1.6825

Target: 1.7130

Time horizon: four days.

GBPCAD one-hour showing intraday uptrend line and take-profit level:
Source: Saxo Bank 

GBPCAD four-hour highlighting break of consolidation range:
Source: Saxo Bank 

GBPCAD five-year daily with moving averages:

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Source: Saxo Bank

— Edited by Michael McKenna

For more on forex click here.

Non-independent investment research disclaimer applies. Read more
22 August
Michael O'Neill Michael O'Neill
UPDATE: GBPCAD has performed admirably this morning rallying above minor resistance at 1.6950 to a peak of 1.7020. It is better to be profitable than clever so it makes sense to:
A) Cancel the second buy order at 1.6880

B) Raise the stop loss to 1.6980, guaranteeing a 0.0055 point profit on the trade. while leaving plenty of upside.

NOTE: the stop loss is fairly close to the current markets and is vulnerable to stop-loss hunting in thin Asia markets.
22 August
bancodemon bancodemon
is that a revised version of your prev TP target at 1.7130?
22 August
Michael O'Neill Michael O'Neill
Hi bancodemon. I think that since GBPCAD rallied so quickly for no particular reason, raising the stop loss to guarantee a profit makes sense. The 1.7130 target is just a target.
With luck we get there but we could reverse just as quickly
23 August
bancodemon bancodemon
okay thanks...but what are your views on USDCAD...I think a move downwards is imminent?


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