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GBP/CAD Daily Chart 9/24/2012 8:45AM EDT

Following up with the previous update on GBP/CAD where the market was at resistance, we did indeed get a rejection and a bearish attempt, but that was quickly reversed, and the rally extended beyond the resistance factors, most significantly the declining trendline for 2012. The break was very choppy, but it appears that price is moving away from the from the broken trendline toward the 61.8% retracement level, 1.5922.

Looking at the 4H chart below, because the rally is in this rising wedge pattern, there is a possibility that it is developing a “diagonal triangle”, which is a capitulation pattern according to Elliott Wave principles. This makes me think that the breakout is not very clear at the moment, and that further consolidation might be needed before another breakout clarifies whether the market wants to continue focusing on the upside or reverse.

At this point, a break below 1.5850 would likely initiate the diagonal/ending triangle scenario. At that moment, the first bearish target would be the origin of the triangle, which is also a previous resistance pivot at about 1.5772.

GBP/CAD 4H Chart 8:48AM 9/24/2012

Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.

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