Last Friday we studied the EURCAD, namely the long-standing trend line that had recently come under pressure. The level in question extends from the December 2015 low and has been a key factor since that time.
The fact that the pair struggled to rebound after testing this level last week suggested a lack of bids in the area. It hinted that buyers were about to give up control, but we needed a daily close below 1.4670 to confirm our suspicion.
That close came at the end of Wednesday’s session following a decline of more than 300 pips. With buyers in full retreat and a confirmed break of the long-standing trend line, we can begin watching for selling opportunities.
However, with the pair nearly 200 pips below the mean (as measured by the 10 and 20 EMAs), we could see a rotation higher in the coming sessions. Also, selling into support at 1.4460/70 could make for a quick trade in the wrong direction.
On the other hand, any bearish price action from the 1.4670/80 area could offer a favorable opportunity to get short. Key support comes in at 1.4460/70 followed by 1.4080/90.
As mentioned in the weekly forecast:
The trend line from the December 2015 low has only been broken on a daily closing basis on two occasions – November 16, 2016 and April 24, 2017.
The former was a close below it, and the latter was a close above it. Both breaks triggered moves of more than 500 pips.
Whether or not Wednesday’s break will trigger a third 500+ pip move is yet to be seen. But if it does, it would put the target near the April low of 1.4080/90 which is the support level I mentioned above.
Keep in mind that the current price is also supported by a trend line that extends from the current 2017 low at 1.3780. Those seeking additional confirmation can wait for a close below this level before considering a short.
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