Taking a shot on EUR/CAD this week ahead of potential catalysts from Europe, and to play the current positive risk sentiment vibes in the global markets.
EUR/CAD Descending Channel
This week I’m checking out EUR/CAD, which has been on a slow grind lower since topping out around 1.5900 back in early March after the financial market liquidation period.
Recently, the pair has been puttering around the 1.5200 – 1.5300 area, but still forming a descending channel pattern as seen in the chart above. Will the channel form a new top?
I don’t know but I think the odds are pretty good as we’ll get the latest PMI data from Europe this week, which are expected to be better than last month’s reads.
If they do come out better-than-expected and there is a pop higher in the euro, then we may see the top of the channel retested and if resistance will form.
I think the Loonie could outperform the euro this week as global risk sentiment shifts positively today off of comments from Fed Chair Jerome Powell this weekend, as well as on news from Moderna and their positive phase one coronavirus vaccine results.
Oil is also swinging higher to support the Loonie as demand is speculated to return as countries open up their economies. With no top tier catalysts expected from Canada this week, it’s likely these themes will continue to be drivers of the Loonie.
So, I’m taking a shot on EUR/CAD, playing the downtrend ahead of potential Euro area volatility. I’m going to scale in from current levels up to the top of the channel, and my stop will be one daily ATR from the top of the channel.
My max target will be the major area of interest that served as resistance through 2019, a possibility within the next week or two if the current themes and momentum pick up. Here’s what I’m doing:
Short half position EUR/CAD at market (1.5230), max stop loss at 1.5550, max target at 1.4800
Short half position EUR/CAD at 1.5375, max stop loss at 1.5550, max target at 1.4800
I’ll be risking only 1.00% of my account on this position with 2.36 potential R:R if both positions are triggered.
As usual, I’ll look to maximize the trade by adding to my position/roll stop down to max out the trade if traders continue to favor the Loonie over the euro.
Of course, I’ll look to close out quickly if conditions or data changes back in favor of the euro over the Canadian dollar.
As always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.
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