GBPCAD rally is expected to continue in the coming weeks from a technical point of view. Price just broke out of a triangle pattern upside. With the 1 March GBPCAD Elliott wave setup, we look at how swing traders can take advantage of the potential rally.
01 March, AtoZForex - In the 24 February update on the GBPCAD, we looked at the long term and short term likely direction. This currency pair was forecast to make long term bearish continuation. The downside long term expectation will resume when the bullish pullback that started this year completes. The intermediate rally will be an a-b-c correction just as most corrections display. The b-wave was therefore forecast to be a triangle pattern. In the last update, we explained some characteristics of a triangle pattern and where they occur in a price chart. The chart below was used as part of our expectation for more rallies after breakout.
A breakout will be necessary for a bullish confirmation. Price targets are 1.676, 1.71 and 1.76. This pattern will be invalid if price breaks below 1.6240.
Instead of a good breakout, price stretched the e-leg of the triangle that called for a re-look. After the supposed e-leg was stretched, price moved upside, but the contracting triangle wasn't smooth anymore. There was suspicion as to whether the pattern is still a triangle with the wave count above. Taking another look by considering the a-c legs as the a-leg, the d-leg as b, we have a way of accommodating the stretched e-leg as our new c-leg. With this adjustment, we still have a proper contracting triangle, a 'textbook' kind.
1 March GBPCAD Elliott wave setup: bullish opportunity?
The chart above shows a contracting triangle and a first candle breakout before few more short ones. Price is expected to rally further. We could see price rally to 1.71 in the next few weeks. The c-rally to 1.71 may not be as strong as the a-wave rally. The pattern will be terminated if price breaks below the e-leg of the triangle. This setup could be an opportunity for bullish swing traders.
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