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The rising trendline continues to be strong in EUR/CAD, so why not take a shot at it as it’s about to be retested? Will a retest draw in forex buyers again?

EUR/CAD 4-Hour Forex Chart
EUR/CAD 4-Hour Forex Chart

As we can see in the four hour chart above of EUR/CAD, the technical argument is pretty clear: up, up and away! That rising trendline has actually been going since April 2015, so there’s a good chance that a return to the trendline will be taken as an opportunity for buyers to hop back in.

The fundamental argument for a long position has been, and continues to mainly be, slumping oil prices and weakening GDP growth in Canada. We also got a recent boost in the euro on economic data that wasn’t so bad and the idea that more quantitative easing is not in the cards for now from the ECB.  I think risk sentiment has been a big influence on the currency markets recently as well (fear has been driving risk aversion behavior lately), and I think is like to continue which likely means more pressure on the commodity dollars.

Overall, I think the technicals are strong and that the fundamentals still favor a bullish trend, but the recent moves higher may be overdone, so I’m looking for a pullback to enter with a small position.  I look to go long at the major psychological level around the rising trenline/200SMA, with a wide stop of around one weekly ATR, and a target of the recent swing high we saw around the end of August.  Here’s what I’m doing:

Long half position at 1.4900, stop at 1.4550, max profit target at 1.5500

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t follow what I do. Risk Disclosure.

I’m only risking 0.50% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 1.71:1. Of course, anything can happen in the forex markets, so if the story changes I’ll be sure to reassess and adjust quickly if necessary. Stay tuned!

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.