EUR/CAD Chart Triangulating, Downside Break Favored
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EUR/CAD is a cross-rate we’ve been watching recently given its technical positioning on the daily/weekly chart and its price action on the 4-hr chart. The top and drop in late-June put price back below a slope rising up from February 2017 in addition to the bottom of a shorter-term channel since the end of May.
Since declining below these thresholds we’ve seen a weak response. Looking at the 4-hr chart, we initially viewed the price sequence over the past month+ as an upward leaning head-and-shoulders pattern, but more recently with a contraction in price action we are seeing a triangle form. It could make for a complex right shoulder, but focus is now centered on the developing wedge. (Either way, whether one considers it a bearish wedge break or H&S breakdown, bias is the same…)
Given the context of the aforementioned daily slope/channel as well as the chart leaning lower off the March high, a downside break of the wedge is preferred. An undercut will initially have a swing-low from mid-June in focus in the vicinity of 15150/115, followed by a line running over January right around 15000 (yes, this t-line could be the neckline of a broader head-and-shoulders pattern). Beneath there lies the low near 14900 from the end of May.
EUR/CAD Daily Chart (Slope in play)
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EUR/CAD 4-hr Chart
We’ll take it one step at a time. A break below the bottom of the pattern on the 4-hr will have the trade in motion, with a stop placed back inside the pattern. Targeting 15150/115, 15000/4917. We’ll play it by ear as targets near – if momentum is strong, then looking to extend the trade, if momentum stalls then look to start peeling off the position.
On the flip-side, in the event of a breakout to the top-side and recapture of the aforementioned slope, traders may want to play the wedge breakout from the long-side – but given it will be uphill, on this end it is likely a trade which will be avoided.
***Updates will be provided on this idea and others in the trading/technical outlook webinars held on Wednesday and Friday. If you are looking for ideas and feedback on how to improve your overall approach to trading, join me on Thursday’s for the Becoming a Better Trader webinar series.
For another recently expressed bearish bias on this cross, check out Tyler Yell’s take on EUR/CAD.
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.