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Yesterday I wrote about a short opportunity on EURCAD.
The false break that occurred above resistance signaled weakness.
If you saw that post on EURCAD, you know that the resistance area was between 1.4600 and 1.4630.
Friday’s session hit a high of 1.4613 before dropping 60 pips.
Now it seems the pair’s counterpart, GBPCAD, is carving a bearish pattern of its own, this time in the form of a broadening wedge.
Because it’s a rising broadening wedge, it has bearish implications.
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Furthermore, as you can see from the chart below, last Friday’s rally may have put in the first lower high since last August.
Notice how GBPCAD has been carving higher highs and higher lows since the rally began in August of last year.
The broadening wedge combined with what could be the first lower high points to the likelihood of further losses next week.
But keep in mind that GBPCAD hasn’t confirmed the breakout yet.
As of this writing, the wedge support near 1.7090 is still intact as support.
That support level is very near the 1.7050 horizontal level as well.
When we factor all of this in, it means that GBPCAD sellers need to secure a daily close below 1.7050/90 next week to confirm the breakdown.
Remember that I use New York close Forex charts, so the “daily close” refers to 5 pm EST.
Given this week’s bearish price action, such a break doesn’t seem far away.
A close below 1.7050/90 would expose 1.6830 followed by 1.6600.
Alternatively, a close above the area around 1.7380 would suggest strength and delay the bearish outlook.
Just remember that a lower GBPCAD agrees with what we’ve already seen from the pound (GBPUSD) this week.
I also got short at 1.3044 as I pointed out in the member’s area on Wednesday.
The British pound showed no signs of strength into Friday’s close, so I have no reason to believe it won’t continue lower next week.
The Canadian dollar is also holding up relatively well. We saw that first-hand with the EURCAD selloff from 1.4600/30.
So, although the GBPCAD isn’t in reversal territory yet, it doesn’t seem far away given this week’s price action.