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Since the BOC decision is coming up this week, I thought I’d set my one good eye on this neat EUR/CAD setup but I’m waiting for the actual event before taking a side.

EUR/CAD Trade Idea

Loonie bulls seem to be getting their hopes up for a strongly hawkish statement from the Bank of Canada this week as several policymakers have previously expressed their bias for hiking interest rates.

Because of that, I can’t help but consider a potential “buy the rumor, sell the news” situation during the actual monetary policy statement, especially if market watchers think that the announcement is a little less upbeat than expected.

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

In that case, EUR/CAD could be prime for a bounce since it is currently testing the rising trend line support on its 4-hour chart and the 50% Fibonacci retracement level at the 1.4650 minor psychological level. If this keeps losses in check, the pair could bounce back to the swing high just above the 1.5200 mark.

Stochastic is heading down so there may still be some selling pressure left, but the oscillator is already approaching the oversold levels to indicate that buyers might regain control sooner or later.

I’ve picked this particular pair to play a potential BOC disappointment because the euro is also drawing support from speculations of ECB tapering. Even head honcho Draghi himself admitted that the central bank could be open to the idea of reducing stimulus this year.

If I do hop in a long position, I’ll aim for the swing high with a stop below the 61.8% Fib. On the other hand, if the BOC does reaffirm its hawkish bias, I’ll be ready to short on a break of the trend line and 1.4500 handle, setting my sights on the swing low and my stop above the highest Fib.

Here are the entry and exit levels I’m eyeing:

  • Long at 1.4725, stop loss at 1.4475, profit target at 1.5225 for a 2:1 R:R
  • Short at 1.4475, stop loss at 1.4725, profit target at 1.4025 for a 1.8:1 R:R

What do you guys think of my game plan? Care to share your thoughts on how the BOC decision might turn out?

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