GBP/CAD Set-up with Plenty of Confirmation
- Pullback in Daily GBP/CAD Uptrend
- Flat Consolidation Pattern on 4-Hour Chart
- Awaiting Long Signals on Hourly Chart
After a challenging week thus far, select currency pairs are offering set-ups in this choppy market. For example, GBPCAD appears to be pulling back within a daily uptrend and may present a reasonable basis for initiating new long positions.
The daily chart below shows that GBPCAD is just reaching a rising line of support, which may well provide at least a reaction, if not a continuation of the overall uptrend. Nonetheless, lower time frames will have to be analyzed in order to identify support more specifically.
On the four-hour chart below, GBPCAD is potentially creating a flat consolidation after a recent five-wave move up. Elliott wave novices are probably more familiar with the "zig-zag" pattern, but given how price has neatly created two nearly identical highs, there is a significant probability of a flat consolidation developing here instead.
Guest Commentary: Flat Consolidation Pattern in GBP/CAD
With that in mind, a support zone has been identified at “c” as 1.8301-1.8392. This represents a risk zone of 91 pips, which is sizable, but still acceptable for pairs involving the British pound (GBP). However, in order to reduce risk exposure on this trade, the hourly chart (see below) is the desired trigger time frame.
The hourly chart shows more promise for this trade as it develops into what is admittedly a rather broad ending diagonal pattern. There have been four waves to this move already, and the fifth is now developing.
The key support zone has already been contacted, albeit only briefly, but nonetheless, a pin bar or bullish engulfing pattern, or bullish reversal divergence, which is likely to develop at the top of the hour with many indicators, would signal a viable long-entry opportunity. The usual advice about taking perhaps two or three tries at a potential entry applies here as well.
Guest Commentary: Awaiting Long Signals in GBP/CAD
GBPCAD could move in excess of 200 pips to the upside, although admittedly, the overall risk profile is not quite ideal. Then again, this trading environment is far from ideal, but as we’ve said, the best response to such trying market conditions is to continue to take trades, albeit cautiously and in strict accordance with one's own proven trading plan.
By Kaye Lee, private fund trader and head trader consultant, StraightTalkTrading.com
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.