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EURCAD: Short Position on Lofty Valuation

EURCAD: Short Position on Lofty Valuation

Nick Cawley, Strategist

Short EURCAD – 1.55800

Stop Loss – 1.5650

Target 1 (50%) – 1.540

Target 2 (50%) – 1.5365

The New DailyFX Q1EURand CAD Forecasts arenow available to download.

EURCAD in Overbought Territory

We look to go short of EURCAD with a tight stop as the pair starts to move out of overbought territory, using the RSI indicator at the bottom of the chart. A lot of the recent uptick in EURCAD has been due to a weak Canadian dollar on the back of plunging oil prices. With this market now stable, and with recent Eurozone data highlighting ongoing economic weakness, the fundamental backdrop suggests a short EURCAD position for a short-term trade. The Bank of Canada also meets next week – all monetary policy settings are expected to remain unchanged – so we look for a short time frame for this trade ahead of the meeting.

On the technical side, as well as being overbought, the pair struggled to break through the 23.6% Fibonacci retracement level with a great deal of conviction and is likely to move lower. We go short at the current spot price around 1.5580 and set our stop loss just above the recent 9-month high at 1.5650. We target the December 26 low at 1.5400 and the 20-day moving average at 1.5365.

EURCAD Daily Price Chart (February 2018 – January 2, 2018)

EURCAD: Short Position on Lofty Valuation

IG Client Sentiment Datashows how retail investors are positioned in a range of currencies and asset markets.

Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

What is your view on EURCAD – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author at nicholas.cawley@ig.comor via Twitter @nickcawley1.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.