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Important: I use New York close charts so that each 24-hour period closes at 5 pm EST.
Click here to get access to the same charts I use.
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For weeks now we’ve been tracking the EURCAD selloff. I first mentioned the idea of a possible collapse in the member’s area in late June while the pair was trading at 1.5580. Then came the break below 1.5315 in July and last week’s rejection from the 1.5150 resistance area.
However, the more significant pattern that promises a lasting decline has yet to materialize. Until today’s session perhaps.
The Euro cross is currently trading well below the head and shoulders neckline support at 1.4970. You can see how the pair closed back above this level before yesterday’s close (using a New York close chart) to keep the support area intact.
Buyers have their work cut out for them if they intend to continue to hold 1.4970 as support though. With the pair trading 70 pips below the level as I type this, the odds of a late session rally are diminishing.
Still, it’s essential to wait for a daily close below the neckline in order to confirm the 1,300 pip head and shoulders pattern. That’s particularly true for a relatively volatile pair like the EURCAD.
As mentioned last week, a close below 1.4970 would open the door to the next key support at 1.4740. A break below that would expose the confluence of support at 1.4500 which has been my target since my initial entry at 1.5580 in late June.
The measured objective here comes in quite a bit lower than that. While I do think the 2016 and 2017 lows at 1.3800 will be a factor, the objective doesn’t come into play until 1.3650.
As I wrote last Friday, it’s important to keep in mind that even if the pair does move that far south, it won’t be a smooth ride. There are bound to be several bumps along the way including but not limited to the 1.4740 area and especially the 1.4500 handle.
It also won’t be quick. Even a move to 1.4500 will likely take another month or two to play out, so you can imagine how long it might take for sellers to reach 1.3800 or 1.3650.
I remain short from 1.5580 in late June. I’ve since added to the position at 1.5300 and again during the retest of new resistance at 1.5150. I’ve discussed each of these ideas on this website over the last few weeks.
To learn everything you need to know about the head and shoulders pattern, see this lesson.
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