Looking at the upcoming forex catalysts, I thought my best play for the week would be another shot at EUR/CAD. Will a restest of the broken neckline draw in sellers again?
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This week should be a busy one for forex traders with several top tier economic events to likely push price action around. This week, I’m focusing on the upcoming monetary policy decision from the European Central Bank (ECB), and word on the grapevine is that we may see more quantitative easing from them this week. If the ECB does up their QE game, the odds rise that we may see euro selling sentiment grow.
Along with the ECB, we’ll get the latest monetary policy decision from the Bank of Canada, who is expected to hold off on any new changes to policy until the federal government delivers its March budget. So, we may not get any big moves but I think volatility will likely pick up for the short-term.
Overall, I’m still short biased on the euro and this week’s catalysts will likely get me into a good position to short the shared currency against one that has benefitted from broad risk-on sentiment, and not likely to see a shift in sentiment this week.
With that thought, I’ve decided to short EUR/CAD once again IF the pair retests the broken neckline that I played last week for some nice pips. It’s a far off entry point, but given the catalysts coming up, I think it’s a good idea to be a bit prudent. My stop will be a wide one, far above the neckline area. My profit target will be the major support area last seen back at the end of 2015 for a nice potential reward-to-risk ratio. Here’s what I’m doing:
Short half position at 1.5000, max stop at 1.5575, max profit target at 1.4100
Short half position at 1.5250, max stop at 1.5575, max profit target at 1.4100
I’m only risking 1.00% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 2.54:1 if both positions are triggered. Of course, anything can happen in the forex markets, so if the story changes I’ll be sure to reassess and adjust quickly if necessary. Stay tuned by following me on Twitter and Facebook!