Forex Trade Idea: EUR/CAD Pullback to Broken Support

I’ve got a new comdoll trade idea this week and I’m looking at another forex cross pair. Here’s my plan for EUR/CAD:

EUR/CAD 4-hour Forex Chart

EUR/CAD 4-hour Forex Chart

As you can see from the 4-hour forex chart above, the pair recently broke below a major support area around the 1.4000-1.4100 psychological levels then fell to the 1.3900 handle. From there, price pulled back up to the broken support zone, which lines up with the 50% Fibonacci retracement level.

Stochastic is already in the overbought zone, suggesting that euro bears might take control of price action and push EUR/CAD back to the previous lows and beyond. I’m thinking of shorting at market with a wide stop past the 61.8% Fib and aiming for new lows.

My fundamental bias for this pair is to the downside, as the euro is facing the prospect of further ECB easing. Meanwhile, Canada has been consistently posting strong economic figures so far, which might lead the BOC to switch to a more hawkish stance. Heck, Canada’s annual CPI is already way above the central bank’s 2% inflation target so market participants are already buzzing about potential policy tightening.

Here are my trade details:

Short EUR/CAD at 1.4050, stop loss at 1.4150, initial PT at 1.3900.

I’ll be risking only 0.5% of my account on this one since I’ve already got a short GBP/NZD and a short AUD/USD trade open for now.

What do you guys think?

Cheers,

Happy time

 

Other Popular Articles:   

Comdoll Trading Kit GBP/NZD TradeWhat is the STA strategy?Q3 2014 in Review

  • ForExchange

    I think it is a nice analysis and a great setup where everything lines up to make a good trade. The question is only if it is so perfect to go short, don’t you want to aim for a larger win? I do not see very often such setups where everything looks so perfect.

    FE

    • Thanks for the kind feedback! I’ll be aiming for new lows but I plan to lock in a few pips around the previous lows just to be safe. Did you take this one too?

      • ForExchange

        Especially this one not as I have many open trades already. But I have several similar setups!

        • Yipes. Hope your stops were wider than mine!

          • ForExchange

            Hi. I am only shorting EUR vs. AUD and NZD. Of course they are also not doing so great at the moment. Especially AUD. But I am in. Well, you do not have much luck lately with SL. Look at the EURCAD chart now… Good luck to you this week!

  • Yep. Ouch!

  • Kay Hart

    Happy Pip, love your insights. Thanks for being there.

    What do I know I can’t even keep my BabyPips password straight. Had to log on to post to you using disquis.

    I took a closer look at this EURCAD trade. Remember 11.21 Friday’s newsprints: CAD, teachers pet. EUR, whipping boy. A Short should have reaped. It did +215 pips in 12 hours on a Stop 20 using momentum crossovers on multiple timeframes. H4: alert indicator. H1: decision signal. m15: enter/exit trade.

    I can’t trade fibonacci. Use them to pencil in the overall lay of the landscape — but trade decisions?
    I would no more trade on Fibonacci retracements than I would trade on Liberace sheet music.
    Price momentum is the next level to price action, it tells me what the big trading desks are doing in the moment.
    S/Rs, pivot points, ATRs, Fibs are all too academic to me. They tell me what should reasonably happen. They don’t tell me what the big trading desks are doing — only price momentum does that. And EMA crossovers on multiple timeframes does that.
    As a BabyPips member I follow your insights closely. I, too, love the Comdolls. How many traders can say they follow the bi-monthly New Zealand Dairy Auction. Don’t get caught on the wrong side of a NZD that day — comes out 9:30am EST.