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Long-term EUR/CAD Analysis - Trend Lines!

Today we have some supplementary analysis to my recent EUR/CAD divergence setup (see the Related Ideas below).

If we zoom out and take a long-term strategic view of the market, some interesting areas jump off the chart:

  • Firstly, there's a long-term rising trend line (price based) that is formed by lows in August 2012, April 2015, and to a lesser extent February 2017. Price is currently sitting on that trend-line. Which isn't to say it's definitely going to move upwards, but markets have structure all over the place, and it's a silly trader who ignores strong them.
  • Secondly, there's a long-term horizontal support/resistance line formed in the region of 1.4900 - 1.5000. (remember that it can vary by a fairly big margin). Price has reacted to this level consistently over the last two decades. Which isn't surprising as it sits at a major round level. But that's a level that would need to be breached if price does start moving upwards. It could potentially be a good take profit level to exit the market and see what happens in the short-medium term.
  • Thirdly, there's a short-term falling trend line formed by the market highs in March and December 2018. Given that it's a shorter-term trend line , it doesn't take absolute precedence. But should price reach that level again, it's highly likely the market will react in some way.
  • Lastly, there are some interesting trend lines formed by taking a broader look at the MACD indicator. It's a useful trick, and one that few traders employ well, but it can be quite profitable and effective if done right. The problem is identifying what is a significant trend line , and what isn't. I may do a post on it one day (if anyone's interested!) but my general rule is that it needs to have 3 touches (standard for a trend line ), and for a MACD trend line break to signify a market reversal, you need to have a MACD divergence shortly before the line break. It's not perfect, and the higher time frames are better, but it's a good tool to add to your arsenal.

EUR/CAD had a nice bounce Friday before selling off near the close. The quick buying pressure was a good sign, and call me crazy but I think the Euro may begin to reverse now - which would be good for this trade. However, the market may try and shake out some buyers before moving up, so be on the lookout. Alternatively it will just plunge through all structure and fall to the floor - who really knows! :)

Update: in fact, if we lower the trend-line to go from the 2015 lows, rather than the closes, that coincides with 1.4500 S/R, which has been validated over the recent years. That also potentially gives us a bullish MACD /momentum divergence as well.... Interesting.


Good luck!

DD

Comments

Very strooong trendline!
+1 Reply
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