FxWirePro: Caution for EUR/CAD aggressive bulls on deceptive hammer, major trend breach below channel support

EURCAD price slumps have extended steadily and decisively over the past two weeks or so, after the cross dipping for 10 consecutive days, interim bulls have resumed from yesterday. 

As a result, one could observe the hammer formation at 1.4685 levels that seem to be deceptive as the current rallies are not backed by both momentum and the trend indicators, For now, snapping such deceptive rallies could be beneficial for bears as more slumps appear to be most likely upon failure swings at the stiff resistance and the breach below significant supports in the recent past.

We are in the ballpark for a minor at least squeeze higher based on our “rule of thumb” that trend declines (or rallies) usually moderate after 10-12 days consecutive losses (or gains). Although the daily plotting shows hammer pattern, the broader picture for EURCAD is now turning bearish, however, given weakness below key support points and negative longer run chart signals. 

Gains are liable to prove transitory. We reckon intraday strength is liable to slow in the low 1.4713 area in the near-term; above 1.4715 intraday may extend the EUR retest 1.4765.

Overall, the major trend spikes through ascending channel, bears are now breaching below channel support to signal losing strength (refer monthly chart).

Most importantly, both leading and lagging indicators on this timeframe are in bears' favor.

Hence, ahead of BoC monetary policy, at spot reference: 0.7130 levels, contemplating above factors,we advocate shorts in EURCAD futures contracts of July’19 delivery as further upside risks are foreseen with a view arresting potential price slumps and simultaneously, add longs in futures of far-month tenors on hedging grounds (preferably Oct’19 delivery). Thereby, one can directionally position in their FX exposures. The directional implementation of the same trading theme by further allow for a correlation-induced discount in the options trading also if you choose strikes appropriately.