Targeting a EUR/CAD short
By Hao Sun, Trade With Precision
Today I am going to dig more deeply into EUR/CAD breaking down the 1.5000 psychological level, and my analysis and trade plan for this forex pair. This builds on my analysis earlier in the week, to view this, follow this link: https://www.cmcmarkets.com/en-au/news-and-analysis/stalking-consolidation-breakouts
On the Weekly chart, price is now reversed into a downtrend, with the lower high and lower low in place. This is the early stage of a possible new downtrend on the longer-term time frame, with the next potential support level on the Weekly chart around 1.4460. If I can find a good entry and tight stop on a lower time frame, then the potential risk reward could be good, potentially providing a profit window of at least 400 pips
On the Daily chart below, the downtrend now appears to be established. Fanning moving averages (MAs), convergence between the MACD and RSI indicators with price are all possible signs of selling momentum. Price printed an up candle yesterday – a potential sign that a pullback is underway. Because the downtrend is still prevailing, my next step is to identify the potential resistance level on the chart that the price might pullback to, and then formulate my short trade plan.
So here are my two options. Plan one, based on the 1.5000 round number on the Daily Chart which is a key level I’m keeping an eye on. Not only is it a psychological level, but it’s also inside the sweet spot between the 50 percent and 61.8 percent Fibonacci retracement levels. As the 1.5000 level is inside the daily MA Sell Zone (the zone between the 10 and 20MAs) as well, there are multiple factors pointing for a strong reaction at 1.5000 if price retests this level from below. Should price confirm resistance there, and form a small bearish candle, then a Daily trend flow short trade may set up.
Price is currently testing last week’s low of 1.4924. If price keeps finding resistance around this level, then it may start to turn south again. Plan two for a EUR/CAD potential short trade is from the Four-hour chart. Price has already pulled back into the Four-hour MA Sell Zone.
If price keeps rejecting a higher price today - above last week’s low - and forms a small bearish candle, then the Four-hour trend flow short trade may set up for today’s trading session.