EUR/CAD touched the lowest exchange rate it has seen in over 19 months printing a low of 1.3784. The low from this morning came at an equal wave measurement from the January 23 high. That suggests today’s low is near an important level.
Though prices are rallying now, if prices do end up breaking below today’s low, we can use the price break to support a bearish bias.
We will be keeping an eye on Relative Strength Index as well. Currently it is depicting divergence that suggests we may see a bullish move. This is one reason why a breakout trade is selected. One benefit to breakouts is that you let the market dictate to you when it is ready to trade to new lows, in the case. If no new lows are created, then we are saved a losing trading on our bearish bias.
When trading a breakout of this nature, risk is placed just above the recent swing high. We will manually trail the stop a price drop accelerates.
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---Written by Jeremy Wagner, Head Trading Instructor, DailyFX EDU
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