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Is the GBPCAD gearing up for a massive bullish reversal?
Based on the daily and weekly time frames, I would say it’s a likely scenario.
While the inverse head and shoulders below is not the cleanest pattern I’ve seen, it could still attract buyers.
But the key to any reversal that takes place is difficult to see from the daily time frame.
The weekly chart below shows a better view of the catalyst.
Notice how GBPCAD is bouncing from the 1.5870 support area.
That region also attracted buyers in September of 2017, so we shouldn’t be surprised to see GBPCAD up 380 pips since last month’s low.
Even if the pair only manages to make it to those swing lows from last year at 1.6600, that’s still 300 pips from the current price.
However, the big question is, can buyers keep this up?
More specifically, can they confirm the reversal pattern below which could trigger an additional 500 pips of upside?
Buyers will need to secure a daily close above 1.6300 to do that.
Until that occurs, I have no interest in trading GBPCAD as I don’t want to get chopped up in this sideways price action.
If buyers get the job done, we could see the pair extend higher toward the 1.6600 region.
Notice how 1.6600 served as support between August and October of last year.
It’s also the 38.2% Fibonacci retracement of the year-to-date range.
That said, if this does turn out to be an inverse head and shoulders pattern, the objective comes in just above the 1.6800 handle.
Just remember that it’s going to take a daily close above 1.6300 to expose higher levels.
On the other hand, a break below the September 3 low at 1.5956 would negate the idea entirely.