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On May 22nd I wrote about a significant support level for GBPCAD.
The ascending channel support that extends from the September 2017 low has directed the price action here for nearly two years.
It single-handedly supported GBPCAD during the choppy range late last year.
You can even see where the pair carved a bullish rejection candle on May 22nd, the same day I wrote the last commentary.
However, I wasn’t interested in buying GBPCAD.
The decline that began earlier this month was far too aggressive for me to consider buying into weakness.
Furthermore, that May 6th top was a lower high compared to the March highs.
If anything, I was going to watch for a short opportunity following a retest of the 1.7300 region.
But that doesn’t appear likely now.
I often write about the concept of heavy price action. It’s when a market consolidates above a key support level without any follow through from buyers.
The price action on GBPCAD since May 22nd is an excellent example.
Despite this being a massive support level for the pair, buyers haven’t managed to get past the 1.7130 area.
Yesterday’s session even carved a bearish pin bar.
All of this leads me to think that a breakdown is imminent.
As far as I can tell, sellers need a daily close below 1.7010 to get the job done.
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If GBPCAD sellers can secure a sub 1.7010 close, there isn’t much to prevent a move much lower toward those 2018 lows at 1.6600.
That’s 400 pips of real estate to work with, so this is one to watch.
Keep in mind that there is also some minor support around the 1.6800 handle.
Alternatively, if GBPCAD bulls keep today’s close (and subsequent closes) above that 1.7010/20 area, it means channel support is intact.
But that seems unlikely given the recent heavy price action.