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With euro strength still in play and the Loonie taking a hit from Hurricane Harvey’s impact on crude oil, I’m looking at this potential rally on EUR/CAD. Check it out!

Long EUR/CAD Idea

On the pair’s 4-hour time frame, I’m seeing a sketchy inverse head and shoulders chart formation, which is considered a classic reversal signal. Price is starting to break past the neckline resistance at the 1.5000 major psychological handle, indicating that buyers are ready to push for another leg higher.

EUR/CAD 4-hour Forex Chart
EUR/CAD 4-hour Forex Chart

Zooming out to the daily chart shows that the pair has been on a steady climb and has just recently bounced off the long-term rising trend line. Price could be aiming for the nearby ceiling at the 1.5200 major psychological level or might be setting its sights higher.

EUR/CAD Daily Forex Chart
EUR/CAD Daily Forex Chart

Note that the inverse head and shoulders pattern is approximately 500 pips tall so the resulting climb could be of the same size, possibly taking EUR/CAD up to the 1.5500 mark next. If I do hop in a long position, though, I’ll be ready to trail my stop to entry to protect my profits once price tests that 1.5200 area.

I haven’t set any entry orders yet since I’m trying to gauge how much longer Hurricane Harvey could hurt crude oil and the positively-correlated Loonie. Canada has its monthly GDP due later this week and a strong read could revive BOC hike prospects and allow the currency to trade on fundamentals, breaking off its relationship with Black Crack once more.

I’m thinking broad euro strength could continue as Brexit talks have resumed and the shared currency appears to be acting as a safe-haven in the European region. It’s also able to get its share of risk-off flows stemming from the revival of North Korea jitters.

As for euro zone data, I’m seeing a few preliminary CPI releases on the calendar that might influence ECB tapering expectations. Although Draghi didn’t exactly confirm nor deny these speculations, the fact that he didn’t attempt to talk down the currency or downplay economic improvements was enough to encourage euro bulls to charge.

I’m eyeing a potential long position closer to the 1.5100 handle with a wide stop and a target near 1.5500, ready to roll my stop up once price tests 1.5200. I’ll keep y’all posted when I do hop in!

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