Near-term Setups in USD/CAD and GBP/USD

• Update on trade setup we’ve been tracking in USD/CAD and GBP/USD
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Here's an update on the Canadian Dollar and the British Pound trade setups we’ve been tracking this week. For a complete breakdown of these trades and more, review this week’s Strategy Webinar.

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USD/CAD Daily Price Chart

We’ve been tracking this setup in the Canadian Dollar since last month as price was approaching Fibonacci resistance into 1.3375. The subsequent outside-weekly reversal in USD/CAD has now taken price back into a critical pivot range at 1.3100/32.

The focus remains on this key range heading into next week with a daily close below needed to keep the immediate focus lower. I still favor fading strength while below the median-line (currently~ 1.3180) with bearish invalidation at the daily reversal close at 1.3248. A break lower from here targets 1.3047 backed by a more significant support confluence at ~1.2980. Intraday trading levels remain unchanged from last week’s USD/CAD Technical Outlook.

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GBP/USD Daily Price Chart

In last week’s GBP/USD Technical Outlook, we highlighted the threat of a larger recovery in the British Pound after price, “posted an outside-day reversal off slope support.” The advance has seen follow through into the start of the month with Cable now approaching key resistance highlighted in my previous Sterling Analyst Pick at , “at 1.3290-1.3311- a region defined by the June open, the 61.8% retracement of the monthly range, and the 50-line of the descending pitchfork extending off the yearly highs.”

The focus is on a reaction into this zone next week – scaling out of long positioning here near-term. Look for a pullback off this mark with the broader outlook constructive while above 1.3164. A topside breach of this key threshold would suggest a more significant low is place with such scenario targeting the median-line of the descending pitchfork formation, currently just below the 1.35-handle.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

GBP/USDTrader Positioning

• A summary of IG Client Sentiment shows traders are net-long GBP/USD- the ratio stands at +2.32 (69.8% of traders are long) – bearishreading
• Traders have remained net-long since April 20th; price has moved 6.1% lower since then
• Long positions are 2.5% lower than yesterday and 3.1% lower from last week
• Short positions are 3.6% higher than yesterday and 17.5% higher from last week
• We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBP/USD prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current GBP/USD price trend may soon reverse higher despite the fact traders remain net-long.

See how shifts in GBP/USD retail positioning are impacting trend- Learn more about sentiment!

-Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michaelon Twitter @MBForex or contact him at mboutros@dailyfx.com