FxWirePro: EUR/CAD ‘run-away gap’ nudges prices below DMAs but ‘engulfing’ counters, bears still imminent on ‘shooting star’ formation

EURCAD bearish candles with big real bodies are signifying the weakness in this pair, it has also formed gap-down pattern that slides prices well below DMAs. 

On the contrary, bulls have attempted to bounce back with engulfing pattern.

While both momentum and trend indicators still signal bearish pressures, more slumps possible only on breach below 7DMA.

Moreover, previous upswings are not backed by momentum confirmation (refer daily chart). 

On a broader perspective, the major trend spikes through rising channel, shooting star pops-up exactly at channel resistance followed by dips, and hammers at channel support in the past (refer monthly plotting), both leading and lagging indicators signal faded strength. You could very well observe as and when the prices touched channel baseline and top line, the price pattern behaves in an adverse way.

Both RSI and stochastic curves are showing the downward convergence to the price slumps (monthly). This indicates the lingering bearish sentiments. The lagging indicators have been indecisive but slightly bearish bias.

Hence, for today, contemplating above technical rationale, at spot reference: 1.4875 levels, buying tunnel spreads are advocated with upper strikes at 1.4915 levels (i.e. about northward 40 pips from the spot level) and lower strikes at 1.4830 levels(i.e 40 pips southwards), the strategy would likely fetch us handsome yields with magnified effects as the underlying spot FX keeps dipping but remains above lower strikes on expiration.

Alternatively, shorting futures contracts with mid-month tenors is advocated on hedging grounds.

Currency Strength Index: FxWirePro's hourly EUR spot index is flashing at -72 (which is bearish), while hourly CAD spot index was at -3 (neutral) at 07:12 GMT. 

For more details on the index, please refer below weblink:

http://www.fxwirepro.com/currencyindex