The EUR/CAD pair fell during the session initially on Monday, but found enough support to turn things back around and form a pretty good looking hammer. The hammer of course suggests that the buyers are starting to step into the marketplace, but don’t be fooled: this market is without a doubt very bearish, and should only remain so over the longer term.
This chart could be a buying opportunity for those of you who are short-term traders, but when I like to think about when I see a chart like this is that it is telling me I can buy Canadian dollars “on the cheap.” What I mean by this is that we will more than likely get some type of bounce from here, but at the first signs of weakness I have to be willing to sell this market.
Downtrend should continue, especially if the oil market is to be believed.
The oil markets continue to impress, although we did have a slightly negative session during the day on Monday. Markets in that region of the world are pulling back a little bit, and that might be the catalyst to push this market higher. However, the 20 day exponential moving average has been dynamic support and resistance in a fairly reliable manner over the last several months, and it happens to line up nicely with the 1.4750 region, an area that I see a lot of clustering and therefore sell orders. This should be an area of that the buyers really struggle to push the market above.
With that in mind, I think simply sitting on the sidelines and waiting for the opportunity to sell this market at a higher level is probably the best way to go right now. Normally, I would not hesitate to sell a break of the bottom of the hammer if we fall again during the session on Tuesday, but since we are so close to the 1.45 handle, I would probably forgo selling this market without a bit of a bounce first.
