Trading Currency GBP to CAD Technical Analysis

In this trade, we have the GBP/CAD pair gapping lower at the open during the Asian Monday morning, and the traders in New Zealand and Australia have managed to push this pair below the 1.8750 level, and possibly even more importantly, the uptrend line. We are well below the 200 day exponential moving average, and therefore this goes with the longer-term trend.

When I look at the one-hour chart, I can see that the gap has been tested a couple of times at the 1.8750 level, but I recognize that the gap extends a little bit above there. For the stop loss, I’m going to put it at the 1.88 handle. (Full disclosure: one of the drivers of the British pound lower is the fact that the polls over the weekend suggested that the “leave the European Union” sentiment is now the majority in the United Kingdom.” Because of this, I am selling with a stop loss at the 1.8810 level, just to put it slightly above the big figure. I do not set to take profit yet, simply because it’s hard to tell how this is going to play out but it looks as if we are going to continue the downward motion and pattern that we’ve seen for some time on the daily and for our charts. At this point in time, I suspect that the 1.85 level will be the first serious target.

We have formed a couple of 4 hour candles, and at this point time seem to be struggling with the 1.86 level, which has quite a bit of noise all the way down to the 1.85 level as mentioned earlier. I could move my stop loss back to the breakeven level, but at this point in time I felt that it was better to take profits due to the fact that a lot of this was headline driven.

(After recording this video, the GBP/CAD pair did in fact reach down to the 1.85 handle. However, the very next day had the market turning around drastically due to headlines coming out of the United Kingdom suggesting that there is still quite a bit of the country that’s looking to stay in the European Union, causing even more volatility. Because of this, it appears that taking my 99 pip profit was the right choice.)