This pair has been trading sideways for a couple of days, oscillating around the 1.25 level. And as we know, consolidation breeds advanced price patterns. Today there is a host of Canadian and US data coming out that could give it an impulse. The key US data point today will be the ADP employment change. Its the prelude to NFP and might give us a hint of what that figure will be like on Friday. The key Canadian news event will be the rate statement by the BoC, where we will find out whether the BoC will cut or hold. Yesterdays positive GDP figure could mean they wont cut (yet). We shall see.
On the technical side, we have the contour of a bearish Gartley pattern developing on the 4H timeframe. Price has travelled 40% from C towards the potential reversal zone (PRZ) and this set up qualifies as a “trade candidate” for my watch list. When defining the potential reversal zone (PRZ) for a Gartley pattern, we look at the projection of three harmonic levels. I: the 786 retracement of XA, II: an AB = CD pattern and III: a BC expansion converging in the same area (in this case 1414 BC). This defines a tight zone, about 20 pips wide, represented by the orange lines in the chart. Should price action test the PRZ and reverse convincingly, I would enter short. SL goes 10 pips behind X. TP1 = 382 retracement of AD and TP2 = 618 retracement of AD.
There are 134 pips to be made (if this pair follows the script) and the trade has a reward – risk ratio of 2.0!