The EURCAD looks ready to resume its downtrend.
We saw the pair’s ability to move lower in late June and early July of last year.
The same was true between August and September when the EURCAD lost over 500 pips.
However, the pair can be challenging at times.
And not for days at a time, but weeks and months.
Look no further than the latest price action that began last October and lasted through December of last year.
The EURCAD spent those three months consolidating within a choppy but purposeful ascending channel.
Most would consider the pair to be unfavorable, given what I just wrote.
But we can use this latest round of consolidation to our advantage.
We know that trends cycle through periods of consolidation and continuation.
As a swing/breakout trader, I want to catch a market when it’s coming out of consolidation because I know the next phase is likely to be the continuation.
Notice how the recent consolidation appears to have ended.
We had a daily close below support on January 2nd.
The pair then retested former channel support as new resistance and even carved a bearish pin bar in the process.
Now, here’s the tricky part.
If you missed the retest of support turned resistance on January 15th and the 50% retracement on the 16th, shorting the pair now may be ill-advised.
That’s because we have several recent lows near today’s price.
The EURCAD found support in the 1.4460 area earlier this month.
With that in mind, the better option may be to wait for a daily close below the 1.4460 region, which could be as low as 1.4450, before entertaining a short.
The “daily close” refers to the 5 pm EST close using proper New York close charts. Go here to get access to the same Forex charts I use.
Just keep in mind that the EURCAD has a history of being choppy.
So, even a daily close below 1.4450 does not mean EURCAD will continue to move lower, much less in an orderly fashion.
Then again, I could say that about any currency pair.
As for key support on the way down, I’ll be keeping a close eye on 1.4360, 1.4260, and 1.4130.
Each of those levels has played a role in the last few years, especially when viewing the weekly time frame.
Alternatively, a daily close above 1.4600 would negate the bearish outlook.
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