Published On: Fri, Feb 10th, 2017

Bullish GBPCAD buying further dips

InstaForex

Medium term

/

Buy

Trade view / 9 minutes ago

Analyst / PIA First

United Kingdom

Instrument: GBPCAD

Price target: 1.7530

Market price: 1.6290

Background


We are bullish in GBP through most crosses and GBPCAD is no exception. We also like the idea of selling CAD over the medium term as USDCAD holds within a large descending triangle formation (bias to break higher). A break of trend should see an impulse move to the upside. 

GBPCAD breakdown

Monthly: Although we traded to the lowest level in 75 months in October 2016, dips have been bought under the trend of higher lows. Trendline resistance is seen at 1.6800 with a break there highlighting the 1.7350-1.7530 zone.

Source: Saxo Bank

Weekly: A bearish five-wave pattern (Elliot Wave) was completed close to the 423.6% extension level at 1.5488 (this extension is common in commodity-based crosses). Holding onto the channel top but we look for this resistance to break soon. 

The Marabuzo level from the week of January 16 (bullish Outside Week) is seen at 1.6105. We would not want to see a weekly close below that level. A full AB=CD formation would take us up to the cloud and the aforementioned 1.7530 level. 

Source: Saxo Bank 

Daily:   A bullish reverse head-and-shoulders has formed. A break of 1.6520 and the measured move target is 1.8680.

Source: Saxo Bank 

Intraday (six-hours): Highlights an expanding wedge that has a bias to break to the upside. This is one of the hardest formations to trade (as the range gets wider). We look to buy dips inside the wedge down to the aforementioned Marabuzo level and congestion zone at 1.6105.

 Source: Saxo Bank

Intraday (two-hours): Are we forming an inside reverse bullish head-and-shoulders pattern? This will only be confirmed with a break above the 1.6500-1.6520 area. However, with DeMark posting an exhaustion 13 on two intraday timeframes and with the overall outlook positive, I am happy to start to build a long position. 

Source: Saxo Bank

USDCAD daily: forming an Ending Wedge. A break of 1.3200 and the measured move target is 1.3600.

Source: Saxo Bank

GBPUSD daily: There is scope for downside pressure in GBPUSD but we look for dips to be bought near 1.2250-1.2220.

Source: Saxo Bank

Parameters

Entry: long at 1.6343. Buying a further dip at 1.6120 or a break of 1.6520.

Stop: below 1.5900.

Targets: 1.7530 and 1.8680.

Time horizon: this is a long-term trade. I would expect two to three months for targets

— Edited by Michael McKenna

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