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Important: I use New York close charts so that each 24-hour period closes at 5 pm EST.
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At the beginning of the month (July 2nd to be exact) I pointed out the potential for a 1,500 pip drop on the GBPCAD. The head and shoulders reversal was far from confirmed, but sellers were well on their way to making it a reality.
You’ll also note that the formation of the right shoulder started with the June 22nd bearish pin bar that I discussed in the June 24th weekly forecast.
Since July 2nd, the pair has managed to move less than 100 pips. Yes, it has taken the GBPCAD nearly three weeks to move just 90 pips.
But for the last week, the slow grind hasn’t been much of a surprise. I mentioned the 140-pip range on the 11th of this month. It was range support at 1.7300 that was problematic for those interested in the 1,500 pip reversal pattern.
However, yesterday’s session took care of that and then some. Wednesday’s 1.7204 close puts the 1.7300 handle (former range support) in the rearview mirror. It also means that any retest of the 1.7300 area should attract an influx of selling pressure.
The neckline of the pending head and shoulders, on the other hand, remains untested near 1.7160. We’ll need to monitor the price action over the next few days to see how the GBPCAD reacts to this level that extends from the year to date low.
For the moment, though, that 1.7300 resistance area is a “must hold” for sellers. And as long as the pair remains below it on a daily closing basis (New York 5 pm EST), the GBPCAD remains vulnerable.
Note: What you see in the chart below is only the right shoulder, not the entire head and shoulders pattern.
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