EURCAD may get high(er) for New Year's Eve
EURCAD has never looked back following the ECB action on December 3. It rallied to 1.5320 from 1.4025 and hasn’t been below 1.5020 since the FOMC meeting. Excessive short EURUSD positioning and falling oil prices were behind the move and those factors are still in play today.
EURUSD has been grinding higher since December 23, possibly due to pre-dealing for month end portfolio rebalancing flows as thin holiday markets play havoc with liquidity. USDCAD is bid due to soft oil prices and concern that oversupply and reduced demand will continue to be key factors in the early part of 2016 as evidenced by the Christmas eve USDCAD sell-off and subsequent rally.
The intraday and short term EURCAD technicals are bullish. The minor downtrend from the December 22 peak was broken with the move back above 1.5255. The uptrend from the
beginning of December remains intact above 1.5160
There is a good possibility that the weak oil price environment combined with month-end/year end demand in a holiday thinned market will lead to a steep spike in EURCAD.
Management and risk description
This is a risky trade due to the holiday thinned markets. EURCAD can swing wildly and trigger the stop. It is vulnerable to a rally in oil prices. In addition, the EURCAD has already moved significantly and this idea is really late to the party.
Entry: Buy ½ position of EURCAD at market (Currently 1.5275) balance at 1.5205
Target: 1.5450-1.5500 area
Time horizon: December, 31 2015
Chart EURCAD 30 minute with uptrend and broken downtrend shown
Chart EURCAD 4 hour with stop loss area noted
Chart: EURCAD daily showing take profit area
Chart: EURCAD 5 year daily with moving averages
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