The GBP/CAD trend remains very bullish and the current pullback could be providing a reasonable buying opportunity for the short, medium and even long term.
Disclaimer: The analysis presented in this article is for educational purposes only and should not be considered as financial advice.
This analysis was done on MetaTrader 4.
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Trade Idea Details:
GBP/CAD symbol on the MT4 platform
Key support levels: 1.7418, 1.7348
Key resistance levels: 1.7677, 1.7804
Starting with the Weekly chart, the most important fact is that key resistance has been formed near 1.7800 psychological round number. It has been rejected on multiple occasions during the past few years and still could be acting as a very important price level. Besides, this resistance corresponds to the 23.6% Fibs, which was applied to the last major uptrend that occurred between 09.2017 – 03.2018. At the same time, the 38.2% Fibs at 1.7426 is currently playing the role of support and could be a very attractive price area for the long term investors.
On the Daily chart, there is a crossover of the 50 Exponential Moving Average above the 200 Simple Moving Average. We might call it a “Golden Cross”, which can be considered a very bullish sign for the GBP/CAD. On this chart there are two major resistance levels, The first, as per the weekly chart, is located at 1.7800 area, while the second is seen at 88.6% Fibs at 1.7677, where the price already bounced off on the July 31.
While the uptrend can be expected to continue, GBP/CAD might either re-test the 1.7677 resistance or, if it gets broken, will move towards the second and the final upside target at 1.7800.
The confirmation of the uptrend could be the rejection of the 50 EMA on the 4-hour timeframe. Along with the EMA, GBP/CAD has cleanly rejected the 61.8% Fibs at 1.7417 which means that price might continue rising at any time as long as 4h close remains above the Fib support.
In regards to the upside target, the Fibonacci retracement indicator was applied to the corrective wave down, after pair broke above the downtrend trendline and then rejected it along with the 200 EMA. It shows that 461.8% Fibs at 1.7804 exactly corresponds to the 23.6% Fibs as per the weekly chart, making it an extreme supply zone.
Potential Trade Idea:
Right now GBP/CAD is testing the 50SMA, which previously already acted as the support on two occasions. Perhaps this time there will be a similar price action, the rejection of the SMA. Therefore, buying opportunity is presented while price remains near 1.7430 area, with the final upside target at 1.7804. The stop loss is placed below the previously made low at 1.7325, and based on the nearest upside target (1.7677) provides a 1:2 Risk/Reward ratio.