EUR/CAD has been on the move higher this past week, recently breaking above a previous swing high. Will more bulls hop in or is this a fake out in the making?
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What to Watch: EUR/CAD
On the one hour chart of EUR/CAD above, we can see the pair recently broke out of a consolidation pattern, possibly a reaction to the solid round of Europe economic updates last Friday (German ifo Business sentiment improves to 92.1, German Producer prices improve to +0.2% m/m, etc.), and possibly in reaction to oil’s turn towards negative on risk aversion sentiment as a new coronavirus strain is detected.
This brought the pair to break above the previous swing high just above the 1.5700 major psychological handle, which now brings on the question of whether or not this will draw in more bulls to the party, or if the bears will take control here.
Up ahead, we’ve got the weekly crude oil inventory change from the API to potentially bring volatility to crude / the Canadian dollar. And from Europe, we’ve got a round of low to mid-tier economic updates that collectively could bring some action to the euro.
For the bulls, a rise in crude oil inventory and a round of net positive European updates may draw in more buyers to play the trend, at which point scaling into a long position for a swing play makes sense.
Depending on where the market is at after the morning London data releases, you could hop in at market prices to catch a potential move further, or be more conservative by waiting for a pullback to the broken resistance level before pulling the trigger on a long position.
Of if you wanna trade somewhere in between, considering scaling into a long position to reduce the risk of missing a move.
For the bears out there on EUR/CAD, if you think this is a fakeout in the making, scaling into a long position at current prices makes sense. Once we see the data released later, adding to the position if the data supports it can be the next step.
For the more conservative bearish types, considering waiting for the data to be released and for the market to move back below the 1.5700 and holding before taking a shot at a swing short, counter trend play.