EUR/CAD Online Currency Trading Correction Wave Pattern – May 21, 2014

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EUR/CAD Online Currency Trading Correction Wave Pattern - May 21, 2014

EUR/CAD Online Currency Trading Correction Wave Pattern - May 21, 2014

A head and shoulder online currency trading pattern previously formed on EUR/CAD’s 4-hour time frame, indicating that the previous uptrend was about to turn. Selling pressure pushed the pair below the pattern’s neckline but it appears that a corrective wave pattern is in play.

The impulse wave spanned from 1.5300 to 1.4800, with the Fibonacci retracement tool showing that the pullback to the 61.8% Fib might coincide with the pattern’s broken neckline. A shallow online currency trading market correction might simply last until the 38.2% Fib level, which is in line with the 1.5000 major psychological support level.

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EUR/CAD Online Currency Trading Outlook

If the pair finds resistance at 1.5000, it might move back down to test the previous lows at 1.4800. Stronger selling pressure, spurred by the prospect of further ECB easing, might even lead to a break below 1.4600 and a sharper move down to the 1.4600 support zone. Take note that the head and shoulders online currency trading formation is roughly 600 pips in height, which suggests that the resulting selloff could be of the same size.

Euro selling pressure could increase as the ECB statement draws nearer. Last week, the German central bank expressed its willingness to back further stimulus from the ECB, as deflation and a rising exchange rate have presented persistent economic challenges for the economy. Several ECB officials have echoed this sentiment, indicating that there’s a strong likelihood of implementing negative deposit rates or increased asset purchases by June.

However, ECB Governor Draghi pointed out that they would wait for the CPI forecasts to be released before coming up with a decision. Any downgrades on the 2016 estimates could mean further easing, which might lead to a steeper drop for the euro against its online currency trading counterparts.

As for the Canadian dollar, data has been mixed but has been showing signs of moderating. Hiring was weaker than expected but other economic indicators have managed to come in as expected.

To contact the reporter of the story: Marco Roemer at marco@forexminute.com

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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.