On Tuesday I mentioned that the EURCAD was likely to remain soft below the 1.4380 handle. This level is the 2011 high and has been a significant influence ever since. It’s also the 50% retracement of last week’s bearish engulfing pattern.
With this in mind, I was intent on waiting for a sell signal from the 1.4380 area. And given the relief rally so far this week, a retest of the level seemed plausible.
However, a recent development on the intraday charts suggests otherwise.
You may recall my reference to an intraday ascending channel in Tuesday’s post. I mentioned this second entry method would kick in should buyers fail to reach 1.4380 over the coming sessions.
While there is no guarantee that buyers won’t take prices higher from here, the support level of the channel I mentioned has failed. It’s best viewed on the 1-hour chart below but those who only trade the 4-hour time frame and higher could play it that way all the same.
Should sellers regain control, the next key support level comes in at Monday’s low of 1.4170. A close below that would expose the 1.4030/40 area followed by the 2016 and (current) 2017 lows near 1.3820.
Keep in mind that the next 24 hours holds key events for both currencies. At 8:30 am EST we have Canada employment figures as well as U.S. non-farm payroll and the latest unemployment rate.
The combination of these releases will no doubt trigger a spike in volatility for a pair like the EURCAD.
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