A few months ago, EUR/CAD was trading near 1.56 and now, it's around 1.42. While some say its oversold, we feel there's still a little more downside. In this article, we'll discuss a trade which can be taken right now.
This three-hour chart includes a simple Elliott Wave count from the early September low of 1.4035. The sharp move lower within wave 'blue (iii)' was last week's ECB rate cut from 0.15% to 0.05%. After that event, EUR/CAD fell to 1.4035 and subsequently pulled back in wave 'yellow iv' to 1.4183. While it's possible that 1.4183 is the end of correction, we'll allow another 20-30 pips "just in case". We're therefore interested in shorting EUR/CAD near this fourth wave low with a useful risk/reward.
Therefore, we’d look to sell EUR/CAD at market if the price is 1.4120 (or higher). Our stop will be at 1.4210. Our single target will be 1.4010. At worst, we're risking 90 pips to try to make 110 pips so the minimum risk/reward is 1.22. Other trade management details are provided below.
Short Setup for EUR/CAD
Trade: Sell at (or above) 1.4120.
Stop Loss: Place stop at 1.4210.
Take Profit: The single ‘take profit’ level is 1.4010.
Trade Management: If price reaches 1.4030 without triggering the entry, cancel all orders. Further, if the entry is triggered and price moves below 1.4030, lower the stop to 1.4120.
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