I last mentioned the EURCAD on November 17th shortly after the pair had broken below the trend line that extends from the December 2015 low. The idea was to watch for a retest of former trend line support as new resistance.
Unfortunately, a rounded retest never materialized which kept us on the sidelines. But the aftermath of yesterday’s session leads me to believe that we may get a move toward the 1.4440/50 area after all.
The bullish engulfing candle that formed as a result of yesterday’s volatility could trigger a bounce higher from current levels. Furthermore, the candlestick pattern formed at the 1.4050 support level that I mentioned in last month’s commentary.
Yesterday’s move accomplishes two things:
- It tells us that 1.4050 is indeed a significant level and worth having on our chart
- The bullish engulfing candle puts the focus back on the 1.4440/50 area
This combination leaves us waiting for a move back toward the twelve-month trend line. Any sell signal from this area could offer a favorable opportunity to get short with a target of 1.4050.
A close below the 1.4050 handle would open the door for a move toward 1.3760. This level was the neckline of the inverse head and shoulders pattern that formed between March and May of last year.
Alternatively, a daily close back above new trend line resistance near 1.4440/50 would negate the bearish bias.
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