During yesterday’s session, the EURCAD broke an eleven-month trend line that I first mentioned in the October 16th weekly forecast. The level dates back to December of last year and helped keep the pair afloat on four separate occasions before failing yesterday.
You’ll also notice from the chart below that this trend line triggered a bullish pin bar on October 19th. This candlestick confirmed our suspicion that the level is the line in the sand between buyers and sellers.
We can also see that today’s high (so far) is 1.4409, which coincides with the trend line in the chart below.
However, I’m not interested in entering just yet. Due to the selloff that began as a result of the U.S. elections, the pair has become quite overstretched to the downside.
With this in mind, I’ll need to see some consolidation over the next few days before considering a selling opportunity. If sellers have other plans for the EURCAD and it takes off without me, so be it.
Key support comes in at the December 2015 lows near 1.4050 followed by 1.3760.
The AUDCAD also broke trend line support during yesterday’s session. Although this level isn’t as substantial as the one above, it propped up nearly six months of price action making it one to watch going forward.
Due to the sharp selloff over the past 24 hours, it may be prudent to wait for a retrace before considering an entry. Doing so will allow for a more favorable risk to reward ratio and give us the conviction needed to risk capital here.
One way to determine if a market is overstretched is to use moving averages. For this reason, I use the 10 and 20 EMAs, which are currently 140 pips above current prices, suggesting that a retrace or perhaps some consolidation is in order before the next leg lower materializes.
Should sellers prevail, the pair would likely encounter support near 0.9730. This area was a key pivot in June and July and is also the 61.8% Fibonacci level when measuring from the current 2016 low at 0.9323 to the recent high at 1.0396.
Keep in mind that the pair could also find buyers near parity, which is currently today’s low.
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