When we look at EUR/CAD price action in the past month, we see a market that is turning bullish.
Since making the April and 2015 low at 1.3022, EUR/CAD consolidated, broke above the range, and consolidated again roughly around 1.34 and 1.37. After this consolidation, price action confirmed that bulls are in charge.
1) Price crossed above the 200-, 100-, and 50-period simple moving averages and then bounced of them as support. This is known as a “bullish slingshot” and is a strong sign of reversal.
2) The RSI has tagged above 70, even above 80 and then held above 40, which shows development of bullish momentum.
3) This week started with a bounce off 1.37 as support, which shows the market breaking above the consolidation range (1.34-1.37).
Now, if there is a pullback, a bullish market should hold above 1.36. A break below 1.34 would shift the trend back to the downside. However, when we look at the daily chart, there is something else bigger we should be monitoring.
The daily chart is very interesting. Note that there is an inverted head and shoulders developing. The shoulders are around 1.34 and the neckline is around 1.3765, which was a previous support pivot. It looks like price is cracking this neckline and opening up the 1.40-1.41 area which involves the 200-day SMA and a falling trendline that we can see better in the weekly chart.
The weekly chart shows a downtrend since Q2 of 2014 from the heights of 1.5585. Now, if we are conservative with the bullish outlook, we will have to limit it to the 1.40-1.41 area and respect the falling channel. However, if price breaks above 1.41, it will open up the 1.45-1.4643 area, which represents the 2015-high and the Q-2014-high. Let’s say EUR/CAD does break above 1.41, if a pullback finds support at or above 1.37, this bullish outlook would hold more water.
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