The EUR/CAD pair fell significantly during the session on Wednesday, as we continue the downtrend formation. Recently, I have suggested that we have broken below a significant support level, and it now looks as if we are going to continue to the downside. This was exacerbated during the session by the strengthening oil market, which of course is normally bullish for the Canadian dollar overall. This will be especially true against the Euro, because unlike the United States, Europe doesn’t have much in the way of oil production. While most people think of the USD/CAD pair when it comes to oil, the reality is that Americans are starting to produce more and more of their own oil, and that of course changes in the dynamics when it comes to that market now. This is a much more pure play on oil in my opinion these days.
I believe that the extraordinarily bearish candle is just a continuation of the breakdown that we have seen in this pair for some time and that pulling back from the 50 day exponential moving average only confirms the new downtrend. I believe that the market will reach towards the 1.4250 level, and once we break below there probably the 1.40 level. I think rallies are now going to be opportunities to sell this pair on short-term charts, and I have no interest in buying at all.
I think sooner or later we will break down significantly and increase the momentum, but keep in mind that this pair does tend to be choppy. When you look at the uptrend that had recently been broken below, you can see that a lot of the candles or very short and therefore representative of a market that grind its way in one direction or the other. I don’t think it’s can be any different to the downside, and therefore you’re going to have to practice patience when it comes to shorting this pair and trying to make money. Nonetheless though, I think the downside will win out.