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Short-term trading idea FX GBPCAD – looking up: W-model on the cards

Trading opportunities on the currency pair: On the back of declining oil prices, I’m expecting to see the formation of a W-model with targets of 1.8428 and 1.9150. Buyers may retreat to 1.7436 before breaking through May's high (23% of the growth from 1.5837 to 1.7930) to provide themselves with a springboard to push higher. The case for growth will disappear if the weekly bar closes below the A-A channel.

Background

On the 13th of February, the pound was trading against the loonie at 1.6335. After the EIA’s Weekly Petroleum Status report the previous Friday, Brent oil prices rose by 1.63%. It was expected that should oil continue its recovery, the GBPCAD pair would continue on its downward path.

This didn’t come to pass as the pair didn’t go any lower than 1.62. The oil market had been in a sideways trend for the last 25 days before exiting downwards. In light of declining oil prices, our cross pair started to move upwards again.

Current situation

I’ve written an idea on Brent oil to go along with this one since the value of the Canadian dollar is closely tied to that of oil. Below is the GBPCAD weekly chart, where a triple base has formed. Still, I’m looking more at a W-model here.

For Brent, I’m expecting to see prices drop to 57.80 USD by the 11th of April. I’m also expecting to see the GBPCAD pair break 1.7853 (05/05/17), with an immediate target of 1.8428. This is a mid-term forecast. If the W-model starts to take shape, we can set our sights on 1.9150, with 1.8428 as the intermediate target.

Buyers may retreat to 1.7436 before breaking through May's high (23% of the growth from 1.5837 to 1.7930) to provide themselves with a springboard to push higher. The case for growth will disappear if the weekly bar closes below the A-A channel.


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