Trade Of The Week: GBPCAD Topping Formation Hints At Downside

Sell GBPCAD

GBP is exposed to further weakness ahead of the BOE meeting on Thursday as investors brace for further Dovishness from the Central Bank in the wake of a deteriorating global growth outlook, underscored by last week’s dismal US jobs report which saw a fourth consecutive low print. Key risk is on any Hawkish slant out of the BOE this week which could undermine this trade idea.

CAD has the potential for a near term rebound following last week’s in-line GDP print and a small stabilisation Chinese data which has seen commodities trading firmer with CAD benefiting from firmer oil prices. Canadian Unemployment on Friday will be key domestic data to watch with a positive print supporting this trade idea.

Trading Idea

The Daily chart shows that whilst we are still with in the confines of a longer term bullish trend there is potentially a medium term top in place with the formation of a head and shoulders pattern evident. Price has broken under key trend line support and is currently stalled at a retest of bearish channel support having moved under the September low.

With Daily Order Flow bearish here and price moving below VWAP, encouraging further downside look to either sell a break down below the 1.9950 level or look to sell a retest of VWAP. Stop placement should consider structure (place above the last h4 swing high).  Target a move back down into the 1.95 support area formed at the February 2015 high.

Update: Move stops to entry – 10/10/2015

GBPCAD Daily Chart

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GBPCAD H4 Chart

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