Expecting a new wave of GBPCAD decrease

20 October 2022 321
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The GBPCAD pair bounced back notably from its yearly minimums. Quotes reached the range of 1.54-1.56, in which the July and first half of August trades were held. Further growth moves meet tough resistance of "bears", making a bet on a new wave of pound decrease. And the Canadian currency has an additional motivation to become stronger.


It seems that the sharp collapse of the British currency was stopped, but its further perspectives are still not much better. The problem with the record inflation in 40 years remains as an issue, even if it will not be compounded by a massive tax cut. The new British government, after scandalous criticism, has decided to reject it after all.


The Bank of England, which also contributed to the stabilization of the financial market, was able to stop buying government bonds last Friday relatively smoothly. However, now it faces an even more difficult task: the purchased bonds will have to be sold back into the market from November 1. The success of this arrangement is under great doubt, and in any case, such fragility of the bond market clearly does not add strength to the British currency.


The Canadian dollar is doing much better: oil prices stopped falling and the predictions of tighter monetary policy continue to shift in the direction of even higher interest rates. After the inflation report for September yesterday, market participants expect the Bank of Canada to be the first developed country regulator to raise its key rate to 4% at the meeting on October 26.


GBPCAD decreased yesterday, which was accompanied by a sell signal from the Stochastic indicator. The main target for the decrease is last week's minimum of 1.51. It is possible to open a position at current prices or wait for another rise of GBPCAD to the level of 1.56 and sell there.



The following trading strategy options can be offered:


1) Sell GBPCAD at the current price. Take profit 1 – 1.529. Take profit 2 – 1.51. Stop loss – 1.56.


2) Sell GBPCAD on the rise to the level of 1.56. Take profit 1 – 1.529. Take profit 2 – 1.51. Stop loss – 1.571.


Also, traders may use Trailing stop instead of a fixed Stop loss at their convenience.

This content is for informational purposes only and is not intended to be investing advice.

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