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GBPCAD – Brexit summit and Kurd/Iraq tensions

Market Analysis

GBPCAD, H4

The pound flinched after report that UK fears a Brexit breakdown if no EU compromise. The Bloomberg report said negotiations will fall apart unless the EU shows signs it is willing to allow trade talk to move forward. Cable fell to 1.3247 from near 1.3300, before recovering to 1.3270. The same performance seen in other Sterling crosses such as GBPCAD pair , which made a dive t0 1.6589, making a long legged candle, driven by Bloomberg report but also the announcement of $9.8 BLN investment inflow in Canada from abroad 

However the pair recovered very quickly since for the last two consecutive hourly session, it is moving northwards above 1.6640.  Despite the big log-legged candle the pair formed a higher down fractal, since Canadian Dollar is correlated with the high Oil prices seen today. Oil rallied to near three-week highs of $52.27, as focus returned to the middle east, and the potential for supply disruptions. Iraqi forces are fighting Kurds near oil-rich Kirkuk, with oil fields and a refinery reportedly seized by Iraq. In addition, the U.S. threat of fresh sanctions on Iran have supported oil prices. The September 28 high of $52.86 is the next upside target level.

Hence on the anticipation of further upside movement for the particular pair, a short-term LOng position was taken at 1.6646,  with  targets at 1.6700 and  at 1.6730 which is also a confluence of 200-Day MA. Support was set at 50-period MA in the hourly chart at 1.6540- 1.6570. The MACD remains positive since Friday, while in the hourly chart, the pair is moving in the upper Bollinger BAnds pattern and seems to be supported quite well by the 50-period MA and 200-period MA.

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Andria Pichidi

Market Analyst

HotForex

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