The highs and lows of a market can tell you a lot about the underlying supply/demand relationship. Unfortunately for most traders, technical indicators have taken over their monitors to the point that they miss out on this very telling barometer of momentum.
But while the highs and lows of a market can be telling, they aren’t exactly tradeable on their own. However, once a simple trend line is added to the mix, you now have a sign of potential strength or weakness combined with a viable trigger to initiate an entry.
In the case of EURCAD, we can see that the pair recently failed to make a higher high between January 20th and February 11th. This indicates that the bullish momentum which began in early December of last year may be coming to an end.
In addition, we have a well-defined trend line that extends off the December 2015 low. To be clear, there is still a slight chance the pair could find enough of a bid to extend beyond the February 11th high at 1.5915.
Having said that, there is no trade setup until the pair clears trend line support on a 4-hour closing basis, which would also reduce the odds of an extended rally from current levels.
If the pair should breach this trend line, the first level of support comes in at the January closing price of 1.5130. A close below that would expose the current 2016 low at 1.4950.