Price action in EUR/CAD didn’t play out as I had hoped, but it still did go my way enough to put me in a small profit. With monetary policy statements coming soon from both the Bank of Canada and European Central Bank, I’ve decided to take profits and avoid event risk. Here’s a quick review.
Descending Channel Resistance on EUR/CAD
Last week, I decided to short EUR/CAD as it retested the top of a descending channel. My expectation was that we’d see some weakness with the upcoming Eurozone services PMI data and a positive Canadian employment report, and that would drive EUR/CAD from the technical resistance area.
Well, the Eurozone services PMIs did disappoint, but that was more than offset by a big bounce in European retail trade data. EUR/CAD actually move higher up to the 1.5700 handle before finding resistance.
Fortunately for my trade, the Canada dollar saw big gains on Friday after a big beat in job gains and a bounce in oil after OPEC+ agreed to ease oil cuts in January. Combined, we saw the Loonie take the lead over the rest of the majors going into the weekend.
Today, we saw a bounce in the pair from its Friday lows on a slight shift in risk sentiment towards negative thanks to rising covid-19 cases fears. I think that could have legs with no fresh vaccine catalysts expected, and besides that, we have big event catalysts with the upcoming monetary policy statements from both the Bank of Canada and the European Central Bank.
No changes are expected from the BOC, but expectations for the ECB are that we may see some additional stimulus measures. Arguably this could be bad for the euro, but it’s also arguable it could boost the euro higher as more stimulus hopefully means a better economic recovery for Europe.
I have no idea how that could play out (and if there will be any additional factors influencing risk sentiment at the time), so I decided to close out my position at market (1.5526) to lock in a profit and avoid major event risk.
Total: +74 pips / +0.20% gain on 0.50% risk
I still lean bearish on EUR/CAD for now, but I’m going to sit on the sidelines for now and see how this week’s events play out before jumping back in. Stay tuned!
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