EURCAD: Potential Bullish trend regained
The first chart (medium term view) shows EURCAD attempting to re-gain a short term bullish support line (point 2 on the chart). EURCAD’s previous bullish momentum was halted along a key long term bearish resistance line (point 3) after building support along an even higher bullish trend line (point 1 -which has acted as resistance as well). It then broke through both support lines (points 1 and 2) and found support on the lower limit of a parallel long term bearish channel (point 3). Support was sufficient for an attempt at re-gaining its previous short term trend line (point 2 which coincides with horizontal static resistance near 1.3710 (point 5).
If current support (point 2) is sustained another test of long term resistance at (point 3 –upper line) is possible. If resistance (point 3) holds a reversal into a potential bearish continuation (point 4) becomes possible. However, if that line (point 3) fails to hold and the pair trades through, this could be a bullish event (although keeping in mind it’s a bearish trend line and could thus support a descent along its line even if a break to the upside occurred).
Therefore, if current support lines (2 and 1) cannot be re-gained and sustained, we could see another test along the lower resistance line (point 3 – lower line) near 1.36. Although much of the medium to short term momentum has been bullish – the significance of the long term bearish lines are highlighted in the second chart below showing a longer-term view (past 3 years) on a daily chart which highlights the essence of EURCAD’s medium term bullish momentum in a long term bearish channel:
Below are examples of how to trade a bullish continuation if the support lines are regained or a bearish reversal if support lines fail.
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.3741 with a Limit to take profit @ 1.3805 and a stop-loss @ 1.3697 Risk/Reward Summary: Limit risk = +64 pips profit / (-44) Stop-loss risk = Gain to Loss ratio = 1.45
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.3650 with a Limit to take profit @ 1.3600 and a stop-loss @ 1.3700 Risk/Reward Summary: Limit risk = +50 pips profit / (-50) Stop-loss risk = Gain to Loss Ratio = 1.00
Medium term view of EURCAD:
Longer term view of EURCAD: