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I spy with my one good eye this big upside breakout on the falling wedge of EUR/CAD. Should I hop in now or wait for a quick pullback?

Long EUR/CAD Idea

This pair had been edging lower inside this wedge formation since the start of the year, so I’m thinking this break signals a possible turnaround. Heck, this could take EUR/CAD higher by around 1,200 pips or the same height as the chart pattern!

However, I’m having second thoughts about jumping in at market since stochastic is already in the overbought zone. This suggests that euro bulls might be feeling tired and could use a quick break. In that case, a retest of the broken wedge top might still be in the works.

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

Besides, there is still a lot of uncertainty hanging over the euro zone, particularly when it comes to Italy’s debt situation. The European Commission is due to make a formal announcement on budget forecasts for the region and might issue stern warnings to countries in violation of deficit rules.

Aside from that, the ECB meeting minutes could also spur a bit more volatility and euro weakness if the discussions suggest that policymakers are in no rush to consider hiking rates.

Meanwhile, the Canadian dollar is under pressure because of resurfacing trade jitters and persistently weak crude oil. There have been talks of Saudi Arabia and Russia looking into production cuts, so traders might be holding out for the OPEC-JMMC meeting this week also.

And that’s what I’m gonna do, too! Liquidity is expected to be thinner leading up to the Thanksgiving holidays, which suggests that currency pairs might be more sensitive to headlines than usual.

I’ll probably keep an eye out for dips to the broken wedge top closer to the 1.5000 handle to spot a potential entry opportunity if fundamentals still line up with a long idea.

 

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