CADGBP closes above its opening price after recovering from early selling pressure
Canadian Dollar/British Pound (CADGBP) Technical Analysis Report for Jul 31, 2020 | by Techniquant Editorial Team
CADGBP ended the month -4.07% lower at 0.5698 after gaining 9 pips (0.16%) today on high volume. Trading up to 28 pips lower after the open, the forex pair managed to reverse during the session as bulls took control ending the day above its opening price. Closing within the previous day's range, prices missed to decisively move beyond the prior day's trading range.
Daily Candlestick Chart (CADGBP as at Jul 31, 2020):
Friday's trading range has been 52 pips (0.91%), that's above the last trading month's daily average range of 44 pips. Weekly volatility is also higher, being above the market's average weekly trading range. The longer-term, monthly volatility is currently strongly higher than usual for CADGBP.
One bullish candlestick pattern matches today's price action, the Hammer. The last time a Hammer showed up on Monday, CADGBP actually lost -0.58% on the following trading day.
Unable to break through the key technical resistance level at 0.5710 (R1), the FX pair closed below it after spiking up to 0.5710 earlier during the day. The failure to close above the resistance might increase that levels significance going forward.
With another close below the lower Bollinger Band, prices are confirming their strong downward momentum in the short-term. A rally back into the Bollinger Band on the next trading day while could signal a potential change in momentum that might lead to a correction back up towards the center of the Bollinger Bands at 0.5829.
The trend is clearly bearish, showing an intact downtrend in the short, medium and long-term.
Trading close to May's low at 0.5648 we could see further downside momentum if potential sell stops at the level get triggered.
Among the four market conditions that our pattern recognition engine identified today, the statistics for the OHLC Patterns based market condition "Hammer" stand out. Although it is usually interpreted as bullish, it has actually shown to be bearish for CAD/GBP. Out of 34 times, CADGBP closed lower 55.88% of the time on the next trading day after the market condition occurred. The optimal exit for swing trading this condition on the short side has been after 10 trading days, showing a win rate of 61.76% with an average market move of -0.39%.