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Important: I use New York close charts so that each 24-hour period closes at 5 pm EST.
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Many of you have been asking about the EURCAD. I haven’t mentioned it too much since the head and shoulders pattern failed, mostly because there hasn’t been a whole lot to do.
However, I wanted to take a few minutes to discuss the retest of 1.5160 as resistance. I wrote about it on August 27th and as you can see the level has held on a daily closing basis (New York 5 pm EST) ever since.
Friday’s session even carved a long upper wick, suggesting an influx of selling pressure above the 1.5160 area. The lower wick of Friday’s candle is too long for me to consider it a pin bar.
What’s more concerning from a bearish standpoint though is how sellers have failed to push prices lower. Yes, they have defended 1.5160 as resistance so far, but buyers have been there to soak up every offer.
Today we can see how the EURCAD is once again challenging this area. The session close at 5 pm EST is still hours away, so the level hasn’t failed as resistance just yet.
That said, this is not a selling opportunity in my opinion. There’s been too much demand below 1.5160 and Friday’s long upper wick developed after several days of sideways movement.
Everything you learn about the Forex market boils down to supply vs. demand. No matter if you trade the 1-minute chart or the daily time frame, and regardless of whether you use indicators or not. Supply and demand are what move markets, period.
When I look at the EURCAD, I see demand outweighing supply at the moment. Of course, that can change in an instant, but for now, I see no reason to go short.
If the pair closes above 1.5160 on a daily closing basis, there would be more reason to buy than sell. Such a close would expose the next key level at 1.5315. It’s one that generated a sell signal for us at the end of July.
Keep in mind that there is also a trend line that extends from the year to date high at 1.6151. Whether or not market participants pay attention to it is unknown at this point, but it is worth keeping an eye on moving forward.
In summary, this is a wash for me at the moment. Not worth buying and not worth selling. If you’re interested in the Canadian dollar, you may find the price action on the USDCAD more appealing.
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