A Textbook Buying Opportunity in EUR/CAD
- Prolonged Weekly Uptrend in EUR/CAD
- Consolidation Before a New Push Higher
- Key Support Zone for Buying EUR/CAD
This week is starting out with a potential opportunity to hop onto the uptrend in EURCAD, which has been going on for a quite a long time.
Of course, the question always exists as to whether or not a trend is coming to an end, but ultimately, no one can be absolutely certain until it has happened. As a result, continuing to buy dips in an uptrend is the most prudent move.
Guest Commentary: Accelerating Weekly Uptrend in EUR/CAD
The daily chart below is exhibiting a set-up that not all traders would consider taking, but it constitutes what might be a slight hesitation before an upward move. Of course, this could just as easily be the beginning of a deeper pullback, which is why lower time frames are used in order to obtain a more precise entry and counteract this risk.
Guest Commentary: Key Decision Point for EUR/CAD
As this is a mere hesitation, it is not surprising that there are no rising lines of support on the below four-hour chart. However, there is plenty of evidence that price may be approaching a zone of support. Previous horizontal turning points indicate rigorous interaction between bulls and bears in the blue shaded zone. Ideally, price should bounce off this level to continue its upward journey.
Guest Commentary: Key Support Zone for Buying EUR/CAD
The key support zone has been identified as 1.5150-1.5196. This zone is a mere 46 pips in depth, as compared with the potential for a move of 140 pips or more just to retest the recent high. Thus, the risk profile is adequate, but the hourly chart (not shown) should be used as the trigger time frame for this trade.
On the hourly time frame, acceptable triggers would consist of bullish reversal divergence, bullish engulfing patterns, and/or pin bars.
Two or three tries may be needed to get onto this move, however, it is also worth noting that price may completely disregard support and form a deeper pullback, heading back towards the rising line of support instead. In that case, it is necessary to limit losses as much as possible, so no more than three tries should be made, as there will always be another support zone to consider.
By Kaye Lee, private fund trader and head trader consultant, StraightTalkTrading.com
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.