On September 10th I wrote about how GBPCAD was approaching a confluence of resistance at 1.7300. It was the intersection of the head and shoulders neckline, descending channel resistance and a key horizontal level.
Shortly after that post, the pair began consolidating between 1.6900 and 1.7180. As such, GBPCAD never did reach the 1.7300 area.
However, if you kept that descending channel on your chart, you know that it alone triggered the 600-pip selloff that began last Thursday.
I mentioned Thursday’s retest of 1.7200 in the member’s area when the pair was still trading above 1.7100.
Here’s what I posted for member’s last week:
What came next was a 500 pip drop to key support at 1.6600, another level I pointed out on this website on September 10th.
Of course, I had no idea the market would sell off as fast as it did, but all the better for those who sold near 1.7100.
From here things are pretty straightforward. Sellers need to close the pair below 1.6600 on a daily closing basis (using a New York 5 pm EST chart) to further the recent selloff.
If they do close the pair below 1.6600, it will expose the next key support at 1.6350. Take a look at the price action on the daily time frame between July and October of last year to see why I’ve chosen 1.6350.
Alternatively, GBPCAD could use yesterday’s retest of 1.6600 to garner additional bids for a relief rally. We’re already seeing some demand build today, though not a surprise considering the velocity of the recent bearish move.
If GBPCAD does retest 1.6820, it could present an opportunity to get short. There’s a weekend gap in the area as well as several highs and lows from August and September.
So there you have it. We either get a selling opportunity at 1.6820 resistance or a daily close below 1.6600. Either one could offer a chance to join sellers. Last but not least, be sure to mind the daily mean (10 and 20 EMAs) which is still up near 1.6880.