Two days ago I mentioned the possibility of GBPCAD falling below the key 1.8825 handle, which would open the door to further losses toward the 1.8500 support level.
Fast forward to today and the pair has broken below the level on a 4-hour closing basis. GBPCAD had been holding above the area in early session trade, but the surge of US data at 8:30 am EST provided the necessary catalyst for sellers.
So why is this my top trade idea for next week?
Aside from the 320 pips of potential profit, no other currency pair is grappling with the kind of confluence as that of the 1.8825 handle on GBPCAD. At the risk of repeating Wednesday’s commentary (link above), the 1.8825 area represents a critical horizontal level, trend line support as well as a 38.2 Fibonacci retracement level.
This combination makes the pound cross a prime short candidate going into next week, contingent on today’s close of course.
In addition to the immediate opportunity, there is also a chance that the price action since January has carved out a massive head and shoulders reversal. For more on this, see my commentary from two days ago.
While today’s session is far from over, the last 4-hour close indicates that a weekly close below 1.8825 is the likely outcome. So unless a meaningful bid develops in the next three hours, there’s a good chance that we’ll see the recent bearish pressure continue into next week.
Want to see how we are trading this setup? Click here to get lifetime access.