GBP-FX Price Analysis: GBP/CAD on bid and bull's watchlist

With GBP/JPY either at take profit (TP) for a 1:2 risk to reward or still an open trade but risk-free, targeting a 3R TP, traders can now start to focus on additional sterling trades.

• GBP/JPY Price Analysis: Bullish 4-hour close opens prospects of 3R extension

An entry in GBP/CAD is the most compelling opportunity as of today.

The following illustrates where there is an opportunity on the weekly time frame for an upside extension that can be managed from a 4-hour chart. 

Weekly chart

Price is rising a dynamic support line with further upside potential. 

We have seen a weekly impulse breaking old structure, (Aug. double bottom lows), followed by a significant correction to prior resistance that now is expected to continue acting as support. 

The theory is that we have seen the corrective lows already and the chart is prime for an extension, or, another bullish impulse into supply territory. 

Daily chart

However, there is still some work to be done on the daily chart.

Problematically, we still have the structure to get through and close above on a daily basis, highlighted on the chart in the eclipse.

Price can easily turn south from here otherwise. However, moving down to the 4-hour chart, there is enough price action and structure here to work with and in preparation of a daily close above said structure. 

4-hour chart

We can identify the current support structure from where the price would be expected to retest prior to moving significantly higher. 

On a 4-hour bullish close above that daily resistance, the price will be above the 21-moving average and MACD would be expected to confirm the bullish environment by moving above the zero-line.

When the above criteria are met, this is when bulls will seek an optimal entry point, from the first support structure. 

And this is why ...

Strategy rules are so important.

There is a great deal of Brexit noise in the background which makes trading GBP treacherous. 

Take what you can from developed price action, such as GBP/JPY's 1:2 R/R rather than banking on a 3R extension at resistance. Nonetheless, the trade resulted as a breakeven if one opted for the additional R. 

As for GBP/CAD, rules are in place for a reason. 

The MACD never turned positive ad the price never closed convincingly above the daily resistance. So there was no setup and the price crumbled as illustrated in the chart above.