the GBP/CAD bearish reversal at 1.7150 was quite dramatic. The uptrend climed a sturdy 750 pips but the 500 pip fall was equaly impressive due to its speed.
Now price is building a retracement and correction… it’s time for a closer look where traders might find breakout and bounce setup.
The first scenario is that price bounces at support (blue box) for an extended 3rd bullish rally towards the previous resistance (red box) or Fibonacci resistance levels (orange box).
Price would first need to break above the resistance trend line (red) of the descending wedge chart patterns before this outlook is triggered.
The confirmation of a bounce and breakout (green arrows) is probably best monitored by waiting for a bullish 4 hour or daily chart candlestick.
If price reaches the target(s), then also be aware that price might make a bearish bounce for a potential reversal (orange arrows).
In that case potential a larger ABC could be taking place and the bullish price action would complete the wave B.
The 2nd scenario is that price breaks below the support zone (blue). Here are the 2 key aspects for such a breakout:
A bearish break could occur via a BPC scenario – break, pullback, and continuation (red arrows) – towards the -27.2% Fib target and 50% Fib retracement confluence.
At this Fib zone a larger retracement could occur but I would expect price rather to continue lower towards the -61.8% Fib target and 61.8% Fib retracement confluence.
There price might make a bigger bullish bounce (blue arrow) due to the importance and confluence at this support zone.
Thanks and good trading,