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EUR/CAD Intra-day Scalp- Range Trade

EUR/CAD Intra-day Scalp- Range Trade

2011-05-25 19:07:00
Michael Boutros, Technical Strategist
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The EUR/CAD presents short-term scalpers with an opportunity as the pair ranges between an encompassing symmetrical wedge formation. With daily relative strength holding mid-range at 43.8, the pair lacks coherent direction or momentum, providing traders with a range-bound setup. With the recent downturn in commodities prices, and a weaker than expected print on Canadian CPI figures, the loonie has been especially hard hit as expectations for future rate hikes diminished. Likewise, the sovereign debt concerns and fears of a possible Greek default have kept the euro-bulls at bay. Interest rate expectations for both regions are nearly identical, with Credit Suisse overnight swaps factoring in a 75 basis point hike from both central banks for the next twelve months. That said, interest rate differentials currently favor the euro, and while commodity volatility has been peaking in recent weeks, the biased on the pair is slightly to the upside.

EURCAD_Intra_day_Scalp_Range_Trade_body_Picture_2.png, EUR/CAD Intra-day Scalp- Range Trade

Scalps to the upside are favored, noting that an interim trendline from the May 20th peak makes shorts from resistance target 1 quite feasible here as well. With an average true range of nearly 20, profit targets per scalp should be between 10-15 pips depending on entry. Preferred longs are taken from the 50% long-term Fibonacci extension taken from the 2010 and 2011 troughs at 1.37010 and 1.3745, targeting resistance level 1 at 1.3780, backed by 1.3810 and 1.3840.

Key Thresholds

A breach of resistance above the upper bound trendline at 1.3850 eyes longer-term targets at the 61.8% Fibonacci extension at 1.3930, and immediately invalidates said scalp. Likewise, a break below the convergence of the 50% Fibonacci extension and trendline support at 1.3710 puts the trade on hold until a confirmed break of 1.3680 or a move back into the formation. The time frame for this particular scalp is open-ended until such time either of these thresholds are compromised.

Indicator

Timeframe

Level

Fibonacci Extension – 38.2%

Daily

1.3485

Fibonacci Extension – 50.0%

Daily

1.3710

Fibonacci Extension – 61.8

Daily

1.3932

10-SMA

Daily

1.3870

20-SMA

Daily

1.3844

50-SMA

Daily

1.3641

RSI

Daily

43.80

Resistance 1 Target

30min

1.3780

Resistance 2 Target

30min

1.3810

Topside Limit

30min

1.3850

Support 1 Target

30min

1.3745

Support 2 Target

30min

1.3710

Bottom Limit

30min

1.3700

Average True Range

30min

19.78

Related Economic Data Releases

With no data on the Canadian economic docket for the rest of this week, even risk lies with the euro. Overnight, German import prices hit the wires with consensus estimates calling for a print of 0.7% m/m, down from a previous read of 1.1% m/m. The year on year figure is also expected to soften with a print of 9.9%, down from 11.3% y/y. While this data presents limited event risk, danger to the scalp trade mounts at 9:20 GMT when ECB President Jean-Claude Trichet gives a speech on the European economy. With the Eurozone facing such extraordinary difficulties, markets will remain hypersensitive to comments made by the ECB president, and the event could impact the euro’s trajectory on an intra-day basis.

European Upcoming Events

Date

GMT

Importance

Release

Expected

Prior

5/26

6:00

LOW

German Import Price Index (MoM) (APR)

0.7%

1.1%

5/26

6:00

LOW

German Import Price Index (YoY) (APR)

9.9%

11.3%

5/26

9:20

HIGH

ECB President Jean-Claude Trichet Speaks on European Economy

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Written by Michael Boutros, Currency Analyst for DailyFX.com

To contact the author of this report or to subscribe to his daily analysis please sends inquiries to: mboutros@dailyfx.com

You can also follow Michael on Twitter@MBForex

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

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