The EURCAD broke a significant level this week. On Tuesday I shared a chart that showed how sellers were on the verge of closing the pair below the head and shoulders neckline support.
At the time the pair was trading at 1.4895 and hadn’t yet closed the day below the 1.4970 level. But instead of attempting a late session rally, buyers threw in the towel and allowed the pair to drop even further into Tuesday’s close.
The result was a 1.4809 print which left the EURCAD well below the former support area at 1.4970. It also confirmed what we had long suspected to be a head and shoulders reversal.
But it hasn’t been smooth sailing for sellers since Tuesday’s breakdown. The 48 hours between Wednesday and Thursday erased all of Tuesday’s losses, and Friday’s session even pierced 1.4970 before reaching a high of 1.4998.
However, the latest round of figures out of Canada have helped lift the Canadian dollar so far today. The push higher by the dollar sent the EURCAD lower by more than 70 pips in less than five minutes.
For now, the pair is trading back below 1.4920 on a 4-hour closing basis. If sellers can keep prices below this area into today’s close, we should see the bearish momentum continue early next week.
You’ll also notice that today is carving a bearish engulfing range. While it may not be at a significant swing high, the pattern is developing on the back of a retest of support turned resistance at 1.4970.
I do want to be clear though. There is no confirmation until the day closes at 5 pm EST. The EURCAD can be a volatile pair at times. Look no further than the 70 pip drop a couple of hours ago.
So, while things do look promising for sellers now, that can change in an instant. That’s okay though as entering on a Friday isn’t advisable regardless of how favorable the price action appears at the time.
As such, it would be prudent to give the market some time to digest the earlier Canada CPI figures. Provided today closes back below the 1.4920 area, Monday may present an opportunity to get short.
I still have my short position from late June at 1.5580 which I announced in the member’s area at the time. I’ve since added at 1.5300, the retest of 1.5150 resistance as well as yesterday’s 1.4970 print.
Key support below 1.4920 comes in at 1.4740 followed by 1.4500. The objective for the head and shoulders pattern comes in quite a bit lower than that. At the moment, the 2016 lows near 1.3800 appear to be a prime candidate for the measured objective.