The EUR/CAD pair broke higher during the Thursday session as the pair bucked the trend of Euro weakness for the day. The pair going higher shows strength, but the 1.3750 area above is more than likely going to be resistance. The 100 day exponential moving average is in the area as well, and this of course will attract longer-term traders. The 50% Fibonacci retracement level is essentially at current prices as well, and as a result we are looking at a market that could suddenly see some selling pressure in the area.
The euro in general looks like it is going to pull back, so it is a bit perplexing to see such strength. The area above at 1.3750 has been significant resistance in the recent past, so it should be again. With this, I think that this pair is giving a bit of a false signal at this point in time.
Looking for signs of weakness
Even though we see the end of the day closing at the top of the range – a typically bullish signal – the market is “out of synch” with most of the Forex market. The truth is that we could find ourselves in a consolidative pattern between the 1.3750 level on the top, and the 1.34 level on the bottom. The markets could offer a lot of short-term range bound opportunities, so there is that possibility as well.
The market breaking higher and above the 1.3750 level would be a very positive sign though, and at that point in time I would have to become bullish as the clearing of this could be an inverse head and shoulders pattern being broken out of. The market would then go looking for the 1.40 level, an area that of course has a lot of ramifications as to the psychological significance. In other words, there are a lot of moving parts at the moment, as with this we would also be remiss if we didn’t mention that the oil markets could of course have an effect on this pair as well. Just be careful more than anything else.
