I see a writing breakout and retest position on the daily chart of EUR/CAD!
Will the potential support area hold or will we see a breakout this time?
EUR/CAD Daily Currency Pair Chart by TradingView
Last week’s rise in crude oil prices helped support the commodity-linked Canadian dollar against most of its FX peers, allowing the EUR/CAD pair to retreat from highs around 1.5200.
The pair fell to the 50% Fibonacci retracement level of its latest daily high. The larger correction could reach the 61.8% Fibonacci retracement level, which is also around a previous resistance area and an uptrend line that has held since October last year.
Can the long-term interest area remain under control in terms of losses?
Remember that directional biases and volatility in market prices are usually driven by fundamentals. If you haven’t done your homework on the EUR/CAD yet, it’s time to take a look at the economic calendar and stay up to date with the daily fundamental news!
The 100 SMA is above the 200 SMA indicating that the path of least resistance is to the upside or that the uptrend is likely to resume rather than reverse. Additionally, these moving averages are close to the trend line and S1 (1.4790) which adds to their strength as a potential floor.
However, a drop below this area and long bearish candles could lead to a long-term reversal, which could drag EUR/CAD further south towards S2 (1.4670) or down to S3 (1.4450).
Don’t forget that the Bank of Canada (BOC) has its interest rate decision this week, which means that CAD pairs could be subject to additional volatility.
Whichever way you decide to run this setup, be sure to practice proper risk management and take a look at our newly launched Forex Correlation Tool!