Been waiting a while on EUR/CAD to see if that triangle breakdown was a breakout or fakeout. Well, it looks like the bears are firmly in control so it’s time to take my shot!
EUR/CAD Trade Setup
Keeping it simple with this week’s trade by hopping onto the symmetrical triangle breakdown. It’s been a few days since the breakout and it looks like no fakeout in this situation as momentum seems to be picking up on the downside.
Fundamentally, both Canada and the Euro Area have been seeing better data lately, but it looks like the inflation situation seems to be more of a drag in Europe to give a slight edge on the economic front. Also, we’ve got the interest rate differential favoring the Loonie on this one, which could support the Loonie and I think giving the Loonie a little bounce in its step recently is relief for Canadian dollar bulls after U.S. President Trump said that the trade agreements between the U.S. and Canada would only be “tweeked” and not completely overhauled as previously feared. And with the shadow of political uncertainty in Europe, I think the odds are gonna favor the Loonie over the euro in the short-term.
So, I decided to take a small short position today on the chance this breakdown move has legs, and with the next major support not likely to come until around 1.3100 (last seen April 2015), this trade has a good potential return-on-risk. And to give my trade room to breathe, I’m using a 2x daily ATR stop. Here’s what I’m doing:
Short EUR/CAD at market (1.3816), stop loss at 1.4075, max target at 1.3100 for around 2.76:1 return-on-risk. I’ll be risking 0.5% of my account on this position and I’ll look to re-assess to potentially reduce my risk and maximize my gain if the market gets down to the 1.3500 handle.
As always, 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 simply follow what I do.
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