As you can see from the pair’s daily time frame below, a head and shoulders pattern appears to be forming, which means that price has a lot of room to move south.
Price hasn’t broken below the neckline, though, so it’s too early to say that it’s in for a drop of more than two thousand pips or the same height as the chart formation.
Still, I’m bearish on this pair mostly because of the post-Brexit uncertainty in the eurozone and also the oil strike in Nigeria that might dampen supply and push prices up.
Here’s a closer look at that descending channel I’ve marked:
Price action is still a bit of a mess after that EU referendum volatility but it looks like the descending channel stayed intact. I’m looking to short on a pullback to the top of the channel around the 1.4450 minor psychological mark or on a break below the channel support below 1.4250.Depending on where I’m able to short, I’m looking to place a wide 400-pip stop, which is around the pair’s weekly ATR. If EUR/CAD breaks below the neckline around 1.4000-1.4100, I’ll add to my short position.
As always, don’t risk more than 1% of your account on a single trade, and make sure you read our risk disclosure if you’re thinking of taking the same setups!
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