Technical Sentiment: Neutral
Key Takeaways
EUR/CAD has been trending lower in recent weeks, respecting a bearish configuration of Lower Highs and Lower Lows. The pair is expected to break outside a 3-day consolidation stronghold tomorrow, with breakout direction setting the tone for next week as well.
Technical Analysis
EUR/CAD has settled down after correcting approximately 61.8% on the bullish swing starting at 1.4416 up to 1.4733, adopting what can only be described as a strong range personality for the entire week. Movements have slowed down to such an extent that we are seeing a second Inside Bar forming on the Daily chart.
Location wise, this recent consolidation has formed on top of a critical support cluster. 1.4555 was a well respected price pivot zone, tangling with the 200 Simple Moving Average on the 4H timeframe. Just a few pips lower, at 1.4537, the 61.8% Fibonacci retracement remained respected so far – at least by daily bar closes. EUR/CAD engulfs the entire support cluster within the current range between 1.4525 and 1.4580/90.
Free Reports:
If we take oversold Stochastic into consideration and factor in a complete 61.8% Fibonacci retracement, a bullish scenario cannot be excluded while 1.4525 holds ground. CAD would have to disappoint on Friday in order to allow for a bullish bounce. A rally above 1.4590 will confirm this view and pave the way to 1.4670 and 1.4733 next week.
Failure to hold above 1.4525 will invalidate any bullish scenarios. Traders will immediately resume the sell-off, aiming to re-test the main price pivot zone between 1.4408 and 1.4440. Losses should be limited in this area for the foreseeable future.
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Prepared by Alex Z., Chief Currency Strategist at Capital Trust Markets
