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GBPCAD Intraday Strategy
The UK Brexit vote is likely to grab the attention throughout June 2016 until the referendum results are published. Due to many live debates and interviews that are scheduled to take place in June, GBP pairs and crosses are subject to volatile trading sessions. In our intraday strategy we focus on GBPCAD 4hr chart.
GBPCAD 4hr Chart
Please click on the chart to enlarge:
GBPCAD has painted top Head-And-Shoulders (H&S) on the 4hr chart. The 21 Moving Average (MA, in pink) is acting as the nearest resistance for the cross. GBPCAD may provide multiple intraday entries in the market. The first possible entry is a break below the neckline at 1.8990. Upon a successful break, the price may re-test 1.8990 before unfolding the bearish trend that is expected following an affirmed H&S reversal pattern. The initial target is seen at 1.8850, which if holds may lead to corrective gains before a resumption of the downtrend towards 1.8745.
Alternatively, the price may re-test the 21MA before heading to the neckline (1.8885). A successful re-test of the 21MA may present an intraday entry where the neckline is the initial target of the corrective weakness. A break above the 21MA and the diagonal resistance line (in blue) may trigger further gains in GBPCAD, targeting 1.9195. Capitalizing over the gains following the breakout must cautiously executed as we are projecting moderate weakness for GBPCAD. In a scenario where the price tests 1.9195, a weakness is then expected to be seen in the market, targeting 1.8990.
Although the Non-Farm Payrolls (NFP) is due on Friday we suspect GBPCAD may be largely affected by media coverage on the upcoming referendum. To recap, while the polls that are conducted via phone calls are showing a sufficient majority to remain in the EU, the online polls are showing the votes are neck-to-neck with no clear majority. The latest brexit polls are likely to inject extreme volatility when they are published.
The Canadian Gross Domestic Product (GDP) is due on Tuesday, 31 May, 2016. If GBPAD is held in a range at the beginning of the week the GDP may be the initial trigger for our technical analysis.