GBP/USD pulling back from key resistance
GBP/USD is moving lower from the $1.2200 resistance level (3 January low) this morning. The recent sell-off has been dramatic, yet there is likely to be more in the tank for the coming months.
With that in mind, the fall out of a wedge pattern could provide us with the next leg lower. For greater confidence for another strong move, we would need to see an hourly close below $1.2107. However, for now further short-term losses seem likely.
USD/CAD triangle could provide base
USD/CAD is trading within a symmetrical triangle formation this week, following a fall into the 76.4% retracement at C$1.3203. Given the wider long-term eight-month ascending channel, there is a good chance we could be using this triangle as a basing pattern, where a break through C$1.3257 and C$1.3277 would provide confidence of a significant move higher.
Given the shallow nature of the lower bound of this triangle, any pullback towards the trendline could provide the opportunity for longs around the short-term 76.4% (C$1.3203) retracement which would provide a short-term 3/1 trade for a move back into C$1.3239. Given the expectation of a break higher, that 3/1 could easily be amplified if looking at the bigger picture.
Ultimately it depends on someone’s outlook of whether we are seeing a base/reversal or a continuation pattern as to how to play it. Bulls would want to be long from the C$1.3200 region, while shorts will be looking around the C$1.3239 region. Given the long-term considerations, there is a good chance we could see a break higher, yet until we see a break above C$1.3277 or below C$1.3192, it is purely conjecture.