By: Mike Kulej
Recently, the EUR-CAD pair has been one of the better examples of the uncertainty in the markets. Important fundamentals have been shifting dramatically in a relatively short time span, causing sharp turns in prices. That is true for most currencies.
In case of the EUR-CAD, the uncertainty has been equal for both the Euro and the Canadian Dollar. On the intermediate term chart, the price rallied strongly from 1.3650 to 1.4335 in about two weeks, only to fall right back to the starting point even faster. Now it appears that a new rally could be just around the corner.
The price is a process of forming a reversal pattern, a complex rounded bottom. It could be classified as a cup with a handle, or perhaps a saucer – that will only be clear once the pattern is completed. For that, the price must break above the main resistance of 1.3920, which could start a new rally in the EUR-CAD, to perhaps as high as the latest high.
For an emerging new trend, we would like to see a confirmation from the ADX indicator. It has risen already, but it must show the same when (if) the breakout happens. In addition, the sooner the pattern is completed, the higher the probability for a successful rally in the EUR-CAD.