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I’m looking at this simple uptrend retracement play on EUR/CAD as risk aversion seems to be creeping back in the markets.

Think traders will keep steering clear of higher-yielding currencies in the next few hours?

Before we look at the setup, here’s a quick rundown of what happened in the earlier trading session.

Currency Snapshot

Major Forex Pairs Performance from MarketMilk
Major Forex Pairs Performance from MarketMilk

Fresh Market Headlines & Economic Data:

Upcoming Potential Catalysts on the Economic Calendar:

  • U.K. claimant count and average earnings index due 7:00 am GMT
  • BOE Credit Conditions Survey results at 9:30 am GMT
  • ECB monetary policy decision at 12:45 pm GMT
  • ECB press conference at 1:30 pm GMT

What to Watch: EUR/CAD

EUR/CAD 1-hour Forex Chart
EUR/CAD 1-hour Forex Chart

This currency pair is trending higher as its lows since the start of the month can be connected by a rising trend line.

EUR/CAD looks ready for another test of this support area as it retreats from the latest rally, and the Fib retracement tool shows that the 61.8% level lines up with the area of interest.

The recent rally in crude oil prices allowed the positively-correlated Loonie to climb, taking the pair down to the 50% Fib. However, oil bears look ready to jump back in action as OPEC allies suggested they’re ready to ease up on output curbs.

With that, the pair could bounce off the Fib levels and resume the climb to the swing high soon, especially since stochastic is already in the oversold region. This suggests that sellers are exhausted, and turning higher could signal that buyers are regaining control.

Just be careful when trading this euro pair, though, as the ECB decision is coming up later in the session. No actual policy changes are expected, but the central bank might still have some hints on future decisions.

Also, don’t forget to check out the average EUR/CAD volatility when setting entries and exits!