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Waiting Patiently for EUR/USD and GBP/CAD Breaks

Waiting Patiently for EUR/USD and GBP/CAD Breaks

2018-02-28 04:28:00
John Kicklighter, Chief Currency Strategist
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There are a number of the majors and crosses that are leveling up to short-term technical boundaries as speculative debate over a break and hold/reversal start to pick up. Typically, my preference is to favor a 'path of least resistance' as probababilities favor it; but the fundamental charge has started to generate serious concern across the speculative rank lately. When confronted with key technical barriers, tumultuous fundamental winds and remarkable trading potential, I prefer to put the emphasis on conviction and adapt strategy to more conservative trading.

Looking across the Dollar, Pound and Euro; there are a remarkable range of trading opportunities that seme to arise purely from technicals. If I were to refer to the charts alone, this could perhaps be as simple as following statistical norms which would generally suggest trading against key technicals and see prevailing trends or ranges reestablish themselves. However, current condtions are not that cooperative. We have seen many breaks - even those that are 'false breaks' whereby the initial break is registered by follow through completely collapses beneath the market. This approach makes trading much more wieldy and quantitative, which is necessary when faced with such uncertainties.

When picking among the Dollar based majors, there are plenty of options from GBP/USD to USD/JPY to USD/CAD. However, it is wise to neutralize issues like risk trends, to avoid impending theems like Brexit and to generall avoid those options where recent history has shown follow through is all but absent. That said, EUR/USD stands prominently in the rank. I trade to take advantage of a down draft not long ago for this benchmark pair on a break of 1.2350, but follow through proved capped by serious zone support between 1.2175 and 1.2135. Now, I will see if that floor gives and whether it is motivated by a tangible fundamental them that can actually afford momentum. Otherwise, a retreat from the Greenback would serve a EUR/USD range quite well.

EUR/USD Daily Chart

Among the many ranges and wedge through the crosses, one looks particularly intense and perhaps appealing from a trade perspective. The rising wedge from GBP/CAD has been intense and clean . Sterling pairs are going to be plagued by the unceraint of the Brexit path - especially as the EU prepares to release its draft on Brexit standings. I think the greater risk (potential) comes from a bearish break to retrace some of the over-indulgent speculation for the long Pound recovery effort. Yet, choose your option wisely even if you are waiting for a technical cue. GBP/USD is wrapped up in Dollar concerns, EUR/GBP has remarkably buoyant Euro and GBP/JPY is tuned into risk trends. That said, I like GBP/CAD with its rising wedge - especiallly if there is a break below 1.7625. This pair is not too hung up on risk trends, it has big picture technicals and the lean of impending event risk - mainly the EU's plans to crack down on Brexit expectations - support a bearish outcome for the Sterling in the near future.

GBP/CAD Daily Chart

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