The EUR/CAD pair initially fell during the course of the day on Friday, but as you can see turned back around and slammed into significant resistance at the 1.3750 handle. Because of this, I think that the market is kind of looking at the situation as a bit of a “binary decision”, meaning that we are either going to go above or below that area and it will determine where we spend the next several sessions, if not weeks.
We are also at the 38.2 Fibonacci retracement level, so that needs to be considered as well. Although we do not have a resistive candle, I would not hesitate to short one if it appeared. To me, this is a market that is a little bit confused at the moment, and that makes sense considering that the Euro suddenly looks very vulnerable, but at the same time you can say that the Canadian dollar does as well. Essentially, this is a fight between two lightweights and as a result it will more than likely feature quite a bit of volatility.
[CAD:FXAcademy CTA #73]I still favor the trend
I still think the trend will win out to the downside, but the question is whether or not this area can offer that resistance. I would be very leery of a break out into what was confirmed on the daily close, because they could very easily see a bit of a false break out in this general vicinity. After all, you have the 50% Fibonacci retracement level at the 1.350 level, so it’s likely that there is a significant amount of resistance all the way to that area. With that being said, I much more comfortable shorting on a sell signal if we get one.
We will have to wait to see what happens, but this is a pair that will be very interesting watch as it triangulates three major currencies that find themselves at a bit of a crossroads. Ultimately, I am going to be very patient but I think we could get a bit of a longer-term signal soon.
