The Canadian dollar is the best performers today while the pound continues to languish on referendum worries.
The pair looked to be breaking down at the start of the month but last week it aggressively rebounded. A break and a bounce that retests an old level is nothing new in the forex world and you usually want to sell the bounce but the violence and magnitude of this move is notable. Oftentimes if a bounce is violent it points to a reversal.
Fundamentally, there’s some reason there because if the Scottish independence movement fails, the pound could continue to move higher as traders re-focus on Carney’s pledges to raise rates.
But from a purely technical perspective, the failure to retake the May low of 1.81 is a negative signal.
There are two ways I’d attack the trade:
- With a ‘buy’ order above 1.81
- A sell order below Friday’s low of 1.7902
No matter what kind of GBP trade you’re in at the moment, you need to keep a close eye on referendum polls and news.
GBPCAD daily chart
