This past Tuesday when the GBPCAD was trading near 1.6130 I commented on the idea that the pair could find selling pressure at 1.6207. This area had a significant influence on price action in 2012 and 2013 and was, therefore, a level of interest this week.
In that post, I also mentioned an alternative which included a more substantial reversion to the mean near the August lows at 1.6606.
Here is an excerpt from the commentary:
However, given that prices remain somewhat overextended due to the October 7th crash in the pound, there is a decent chance of a more substantial relief rally toward the August low at 1.6606.
The lack of bearish price action this week at 1.6207 coupled with today’s bullish move suggests that this “chance” could soon become a reality.
With this in mind, my focus for next week shifts to the August low at 1.6606. This area also has a chance of intersecting with an intraday trend line that extends from the September high at 1.7524.
At the moment this is all mere speculation. It will take another session or two at a minimum to determine if the idea on the 4-hour chart below is worth pursuing.
Want to see how we are trading this setup? Click here to get lifetime access.
