EUR/CAD Awaiting Breakout from the 1.4055-1.4340 Range

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EUR/CAD Awaiting Breakout from the 1.4055-1.4340 Range

In February, EUR/CAD has entered a range between roughly 1.4055 and 1.4340 as we can see in the 4H chart below.

EUR/CAD 4H Chart 2/26
eurcad 4h chart 2/26
(click to enlarge)

Note that the moving averages are moving sideways, a sign of a sideways market (though price action was enough to establish that.) The RSI has also shown inability to establish upwards or downwards momentum. A tag above 70 would reflect bullish momentum, and a tag below 60 would reflect bearish momentum. A hold between 40-60 would reflect sideways consolidation momentum. (30-70 would reflect a larger price range, which could also be consolidation but for a larger scale price action.

Now, when we look at the daily chart, we see a sideways-bearish market. Before the choppy price action began in September, price action was bearish. In fact, the 200-, 100-, and 50-day SMAs are still in bearish alignment and price has remained under the 200-day SMA.

EUR/CAD Daily Chart 2/26
eurcad daily chart 2/26
(click to enlarge)

Now, the choppy price action since November can be assessed as an expanding consolidation range. But since the latest high was at 1.45, which was lower than the previous one around 1.4650, we can say EUR/CAD has stopped expanding. Now we have a diamond pattern (expansion followed by narrowing). A diamond pattern is sometimes seen as a possible reversal pattern, especially when it is of this magnitude in the daily chart.

However, if price falls below 1.4050, it is unlikely that EUR/CAD is still in a diamond pattern. Instead, it would have simply moved on from the expanded range and likely shift back into the prevailing downtrend from 2014.

The favored scenario is bearish at the moment based on the overall bearish bias in the daily chart, the failure of expansion, and the threat of breaking below 1.4050 as price tests this support area.

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