This week, I’m checking out a technical setup on EUR/CAD that could draw in sellers after a disappointing update on European business sentiment.
Descending Channel Resistance on EUR/CAD?
On the four hour chart above of EUR/CAD, we can see a descending channel pattern that may draw in technical sellers as it has found resistance once again. We think this is an interesting setup for euro bears, more of whom may come out of the woodwork with today’s Eurozone PMI’s taking a negative turn in November. And given that we could see lockdowns in Europe extended into December, fundamental traders may take short bets on the euro as well.
And we like this idea against the the Loonie as there doesn’t seem to be any scheduled catalysts from Canada on the calendar in the near term to potentially take the Loonie lower. And if we continue to get positive vaccine updates, that may temper lockdown bets that tends to put pressure on oil demand/prices (Canada’s biggest export).
So, with the fundamental outlook more negative on the euro than Canada for now, EUR/CAD has good odds of returning back to the bottom of the channel for now.
We’re looking to short, but we’d like to do so on another retest of the falling highs and a re-assessment of the environment at time. So no fresh orders for now, but we’ve got our alerts set to give us a ping if that falling trendline is crossed.
If a short position still makes sense at that time, we’ll post up a fresh trade plan, and if not or if a long position makes sense, we’ll restructure a trade for that scenario as well.
That’s it for now…so what do you all think? Are you watching EUR/CAD for a potential trade? If so, what’s your directional bias and entry strategy? Let me know in the comments section below!
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