GBP/CAD at 50% retracement level.

OANDA:GBPCAD   British Pound / Canadian Dollar
GBP/CAD at retracement level.
Following a large drawdown of 160 pips, the GBP/CAD is at the 0.5 Fibonacci retracement level. Previous false breakouts have occurred on the 4th June and 8th June - price action tends to repeat itself so this breakout below the trend channel is likely to be false too. The hourly stochastic is giving an oversold signal, along with the %K line crossing above the %D line, leaving a high probability buy trade. Place a buy stop at 1.708 to confirm the trend, scaling in a position may also be a good choice.

WATCHOUT: both the United Kingdom's and Canada's CPI inflation reports are released this week (Wednesday). Predictions show that disinflation may occur in the UK (0.5% down from 0.8%), potentially leading to more contractionary monetary policy by the BofE. Meanwhile, although rated low-level Canada is predicted to recover from its deflationary period potentially pushing the GBP/CAD down.
Comment: The price moved approximately 140pips upwards from this level. Scale-out half the quantity and move the stop loss to 40 pips below the current market price. It is unlikely to penetrate through the resistance level at 1.71750, so place take profit at 1.71700.


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