And I’m out again! I don’t seem to be seeing the bullish momentum I expected for EUR/CAD, and it looks like the fundamental story is starting to shift. In case you missed it, make sure you read my initial trade idea first!
I already had a previous long position on EUR/CAD on what I thought would be a bounce off a short-term rising trend line. However, I jumped out of that one early when buyers seemed to run out of steam. I did hold on to my other entry order on a larger pullback to the 1.4200 area of interest, thinking that more buyers could be waiting at that level.
The pair bounced alright, but it seems to be changing its mind when it comes to pushing for more gains. EUR/CAD retreated upon testing the 1.4350 minor psychological level and is now sliding back to the area of interest so I booked whatever profits I had!
My initial thesis for entering this trade was based on the shift in the ECB’s stance to a less dovish one, but Draghi admitted in his latest speech that they may have been too early in claiming that inflation is already picking up. This sentiment was also shared by a couple of policymakers in the recently published ECB minutes, confirming that the central bank might revert to its dovish mood once more.
To add to that, crude oil prices are turning higher again after breaking past key technical levels like the $50/barrel mark. Traders seem to be shrugging off news of another buildup in U.S. crude oil stockpiles and are focusing on reports that Iran and Saudi Arabia are drawing from reserves instead of ramping up production.
Apart from that, the demand side of the equation is also gaining support from the Chinese government’s decision to grant import quotas to two independent oil plants, basically boosting their energy imports by nearly 30 million barrels over the next few months.
With that, I think it’s time for me to reevaluate my bias on crude oil and the positively-correlated Loonie, as well as the euro. After all, election jitters and Brexit uncertainties could still dampen demand for the shared currency while geopolitical risks in Syria could keep European investors on edge as well.
I only caught a teensy gain with this one since I only put 0.25% on the line and locked in a 45-pip or a 0.045% gain on my account. Still, a win is a win! 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.