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The EURCAD may have just given us an opportunity.
I wrote about the two channels you see below on January 20th.
However, I never traded EURCAD, given that we never saw a confirmed break below that 1.4450 support area.
The price action has also been too choppy for my liking.
Although the pair is still sideways, this week’s price action appears to have confirmed a false break of descending channel resistance.
Notice how on January 31st, the EURCAD closed above the descending channel that extends from the June 2019 high.
That was the same day the EURUSD carved the bull trap that I wrote about earlier on Thursday.
But buyers failed to follow through this week.
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The EURCAD closed back inside the descending channel on Wednesday, and Thursday’s session appears to have fallen below the ascending channel bottom.
Why does this matter?
It matters because false breaks are signals too.
In fact, a pin bar is nothing more than a false break on a lower time frame.
I even wrote a lesson about how to trade false breaks just like this one on EURCAD.
As I often say, a false break to one side of a pattern or level often triggers an extended move in the opposite direction.
Because we’re dealing with a false break of resistance, it means a move lower from EURCAD is likely.
That doesn’t mean it will happen, though.
There are never any guarantees in this business.
But as long as EURCAD remains below that 1.4600 to 1.4630 area on a daily closing basis, there is a good chance the pair will lose additional ground.
The “daily closing basis” refers to 5 pm EST when using the New York close charts I use. These charts are essential for trading price action.
Key support comes in at 1.4450, followed by 1.4360.
Alternatively, a daily close back above 1.4630 would negate the bearish idea and turn our attention back to recent highs at 1.4700.
Note that we have Canada employment figures this Friday at 8:30 am EST, so expect an increase in volatility around that time.