EUR/CAD formed a bearish Gartley pattern on June 4th and the bearish reversal is now finding tentative support from a key trendline that started with the April 17th low of 1.3022. Point D of the Gartley pattern was confirmed with the 70.7% Fibonacci retracement level of the X to A move and the just ahead of the 200.0% Fibonacci expansion level of the B to C leg.
The longer-term trend of euro weakness has tentatively rebounded strongly since mid-April against most of its major trading partners. The prospects of a Greek deal with its creditors is starting to fade. Even if a deal is reached, the effects from the ECB quantitative easing program and increasing supply of the money base should keep the euro heavy.
The EUR/CAD daily chart shows that key support could come from the 50-day SMA if price breaks below the noted trendline support. If the bearish trend accelerates, price could eventual target the 1.34 level. If price is able to rally and recapture the 200-day SMA, major resistance will come from the 1.4150 resistance zone.
The trade: Sell EUR/CAD at 1.3895, with a stop loss at 1.3945, and a take profit at 1.3745. The Risk/Reward Ratio is 1:3.
Edward J. Moya
Senior Market Strategist
WorldWideMarkets Online Trading