By: Mike Kulej
The last few weeks have brought some strong moves in the Euro – Canadian Dollar pair. In January, the Euro surged and pushed this pair to 1.3775, while so far in February, responding to renewed strength in the Loonie, the price dropped over 500 pips, to 1.3212.
On the intermediate term chart, the EUR-CAD shows a confirmed bearish trend. We can see couple of lower lows, combined with lower highs. This allows for drawing a valid trendline, which creates a resistance. In addition, the price is under the 100 SMA, another bearish sign.
What the Charts Mean
When the EUR-CAD made the new low late on Monday, it also formed a candlestick hammer. Happening after a selloff, this often suggests new bullish pressure. In the context of this chart, this raises a question whether it is a bounce within an intermediate down trend or start of a bullish reversal.
The market itself should provide the answer, probably within the next 2-3 days. On the upside, both the trendline and the 100 SMA should provide a strong resistance. Whatever happens if the price reaches that level, will likely determine the immediate direction. On the other hand, it is possible that the EUR-CAD will drift lower and test the 1.3212 low. If broken, the downtrend is in full swing and could take this pair much lower.