Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

EUR/CAD To Choose Between Its Bearish Channel Or 200-Day Average

Published 2018-05-11, 10:37 a/m
Updated 2023-07-09, 06:32 a/m

EUR/CAD is the latest cross to hesitate at a technical juncture, where it’s to choose between maintaining a bearish channel or respect its 200-day average.

For the past few weeks EUR/CAD has provided an almost perfect divergent theme. Eurozone data has continued to underperform and push back expectations of ECB tightening, while markets have rekindled their belief that Bank of Canada are on track to raise rates again. This has allowed EUR/CAD to provide a decent daily trend structure for bears.

Since the 1.6151 high, EUR/CAD has shed over 6% and done so whilst bearish momentum provided timely retracements within a textbook, bearish channel. Using this data alone, shorts certainly appeal and if the downtrend is to continue, it has potential to test the key structural low at 1.4817 (a further 2.5% depreciation).

This is all well and good, but the cross has a key technical juncture to mull over. Not only has it stalled around the 200-day average, but the spinning top Doji also closed above the September bullish trendline. With such a confluence of support we see the potential for a bounce higher, although eventual short positions would still appeal whilst it remains either within the bearish channel, below the 1.5442 high, or ideally both. If markets continue to believe BoC will hike soon and European data underperforms, we fancy our chances of a short trade in due course. This makes today’s employment figures from Canada of interest.

BoC next meet on May 30, and there’s speculation it could be their next hike. In BoC’s April’s statement they closed off by saying they’ll be “watching Q2 data very closely,” which leaves CAD crosses susceptible to whipsaws around calendar events in the lead-up to May’s meeting. Therefore, we’ll step aside for now but will keep a close eye out for a resumption of the bearish trend.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.