Forex Watchlist: EUR/CAD Major Support

Higher crude oil prices may have lifted the Loonie earlier this week but I’m having doubts that the OPEC can reach an actual agreement. Here’s why I’m looking to buy EUR/CAD.

EUR/CAD Trade Idea

The pair has been trading inside a shallow ascending channel on its daily time frame and is currently hovering at support after that sharp selloff. Now the pair has already moved by around its full weekly ATR so sellers might be booking profits right here, likely triggering a bounce.

Besides, stochastic is dipping into the oversold region to suggest that the move is overdone. I haven’t set any actual entry orders yet since I plan on waiting for the latest daily candle to close to see if reversal signals pop up.

EUR/CAD Daily Forex Chart

EUR/CAD Daily Forex Chart

As Forex Gump mentioned, the euro has been weighed down by concerns regarding Italy’s upcoming referendum, as some fear that this might spark another exit from the region or what they’re dubbing as “Italeave”. However, this might be a very unlikely scenario since it would require an extremely anti-EU political party to win the absolute majority then gain the approval of its bicameral legislature. Still, I wouldn’t count it out given how this year has seen Brexit, Trump’s win, and of course Brangelina’s split.

Kidding aside, my gut tells me that these fears are overblown and that the euro zone is actually faring much better than most people think. In contrast, data from Canada has consistently disappointed, signaling that the economy has a long way to go before recovering from the oil price slump in the past couple of years.

Speaking of crude oil, the Loonie might be forced to return its recent gains since these were simply spurred by reports indicating that OPEC officials are scheduling meetings with energy ministers from Iran, Venezuela, Ecuador, and Russia to put them in an agreeable mood ahead of the official gathering on November 30. But until an actual output deal is produced, oil and the positively-correlated Loonie might not be able to hold on their gains.

I’m planning to go long on a bounce off this 1.4400 area with a stop below the 1.4300 handle. I’ll set my sights on the top of the channel at 1.5000 but I’ll be ready to trail my stop or close partially around the mid-channel area of interest at 1.4700.

As always, don’t risk more than 1% of your account on a single trade and make sure you read our risk disclosure if you’re thinking of taking the same setups.

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