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Big time momentum in favor of EUR/CAD bears today, but now the pair is testing a strong support area on the shorter time frames.

Will the momentum lead to a downside break or is this the opportunity for the bulls to jump back in?

Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on EUR/USD ahead of Euro zone PMI data, so be sure to check that out to see if there is still a potential play!

Equity Markets Bond Yields Commodities & Crypto
DAX: 10521.23 +1.02%
FTSE: 5820.96 +0.87%
S&P 500: 2835.99 +1.31%
DJIA: 23806.63 +1.41%
US 10-yr 0.613% -0.006
Bund 10-YR -0.423% -0.003
UK 10-YR: 0.29% -0.037
JPN 10-YR: -0.005 -0.017
Oil: 14.39 +24.37%
Gold: 1731.70 +2.60%
Bitcoin: 7572.27 +6.44%
Etherium: 189.65 +4.08%

Fresh Market Headlines & Economic Data:

Upcoming Potential Catalysts on the Forex Calendar for U.S. & Asia:

  • U.K. Gfk Consumer confidence at 11:01 pm GMT
  • Japan Inflation at 11:30 pm GMT
  • Japan All Industry Activity index at 4:30 am GMT (Apr. 24)

What to Watch: EUR/CAD

EUR/CAD 1-Hour Forex Chart
EUR/CAD 1-Hour Forex Chart

On the one hour chart above of EUR/CAD, the pair broke below a rising ‘lows’ pattern during the Asia session and picked up steam to the downside, likely on a combination of bouncing oil prices and the historically weak European business sentiment released during the European trading session.

This was a pretty hefty drop on the session, already reaching its daily ATR of around 170 pips from high to low, and now testing a previously strong support area that brought in the bulls all throughout April. The question now is, Will it break or are the bulls taking back control here?

Well right now, global risk sentiment is on the side of the Loonie after more stimulus headlines hit the wires this morning, most notably from the U.S. (Fed Focuses on Lending Programs, but Monetary Policy Deliberations Loom) and Japan (Bank of Japan mulling unlimited bond buying at next meeting -Nikkei), and this seems to be the main driver for financial markets at the moment. As long as we don’t get fresh catalysts to shift that focus within the next session or two, the odds are pretty good that the bears will remain in control.

But since we already saw a big move lower on the session, bears may want to be cautious with their entry strategy and consider shorting on a bounce from the current levels or waiting for a downside break/retest/hold/reversal patterns before putting in short orders.

For the bulls, the strong move and previous support area plays into your favor for a potential quick bounce for the rest of the U.S. session on profit taking, but keep in mind that the trend and fundies supporting it area still to the downside. 

So, keep your risk pretty light on any short-term long positions unless a fresh catalysts shifts sentiment back to negative, a low probability scenario at the moment.