Trading opportunities for currency pair: the price has broken from the support. We have two pinbars and a double bottom. On Monday it’s better not to make any big deals and keep an eye on the price of oil. If the GBP/CAD doesn’t fall, we could see two price zones as a target: 2.0325 and 2.0550. If the price of Brent restores above $35, it will be worth staving off pound purchases.
Background
The last GBP/CAD idea I made was out on 28th December of last year. Back then the pound was going for 2.0674 Canadians. A bounce from the 2.0949 maximum formed a double top on the daily. A restoral of the oil price meant a fall of the GBP/CAD to 2.0340. The targets were reached.
Current situation
It turned out that some interesting trading situations formed on the currency pairs which are not directly dependent on the price of oil. Due to oil prices increasing, the GBP/CAD fell to 1.9872. The previous two candles indicate a strengthening of the pound against its Canadian counterpart, thereby contradicting my oil price expectations. If oil continues to rise, the pound won’t be able to make gains.
The BoE met on Thursday and kept interest rates at 0.5% and asset purchases at £375 billion. All 9 members of the MPC voted for the rates to be left unchanged. This change in the voting led to a fall in the pound, whilst there was a rise in the currency after Carney spoke. Carney nullified the effect by announcing that the next interest rate change is likely to be a rise.
If we look at the oil situation, then according to the COT (Commitments of Traders) the oil market situation is 50/50. Big speculators (NON-COMMERCIAL) increased their gross oil buy positions for last week by 5.1k to 257.4k just by increasing their long positions. They increased long positions by 36.1k to 579.2k contracts. It’s worth mentioning that the growth in oil prices led the big players to open 30.9k short positions. These short positions now total 321.8k contracts. Many traders believed in the end of the correction, although the buyers’ were only holding slightly more weight last week.
The Non-reportable Positions of the small fries showed an opening of long positions 6.8 times more than that of shorts. After the Russian energy minister managed to up oil prices to $36, many traders started to believe in further growth.
They increased long positions by 6,331 to 109,800 last week. Shorts were up by 3,600 to 97,200. Gross long positions stood at 12,600 against last week’s 7,200.
Due to what’s written above, I am sticking with the technical signals. The price has broken from the support. We have two pinbars and a double bottom. On Monday it’s better not to make any big deals and keep an eye on the price of oil. If the GBP/CAD doesn’t fall, we could see two price zones as a target: 2.0325 and 2.0550. If the price of Brent restores above $35, it will be worth staving off pound purchases.
Vladislav Antonov, Alpari analyst