GBPCAD Near Potential Sell Area

GBPCAD, 240 min

UK manufacturing PMI beat forecasts earlier today, unexpectedly rising to a 52.9 headline reading, a three-month high and up from 52.1 in December. The median forecast had been for 51.8. The tick higher in the rate of expansion in the sector is encouraging as it came despite inclement weather and flooding, and global financial market turmoil. Markit, the compiler of the survey, reports that strength in domestic demand more than offset a dip in export orders. The domestic economy is being underpinned by a record high level of employment and robust property market.

GBPCAD is trending lower in the 240 min chart but has rallied against the trend today. The rally has brought the pair near the upper end of the bear channel and the descending 30 period simple moving average. Momentum has been waning today after price briefly moved above the 38.2% Fibonacci level on the back of the positive PMI from UK numbers. This suggests that the buyers aren’t that committed to the long side.  We are looking for short entry signals inside the sell area between 38.2% and 50% Fibonacci levels (2.0062-2.0121) with the view of covering the shorts (at least partly) at the Target Area 1 (1.9890-1.9930). The second target area is at 1.9727-1.9768. Proximity of a weekly support level at 1.9850 is a risk and might mean that target 2 won’t be reached.