EURO CAD AT MAJOR TREND LINE- MAJOR REVERSAL?
After completing a large Bear Crown Setup on the Daily Chart, the currency pair declined significantly to complete its 2nd Weekly Range in favour of the Canadian Dollar. Traders who were lucky enough to have traded in this direction, would have been able to capture some of the 700 Pips on offer throughout this decline.
Having now exited from their short positions, traders would now be patiently contemplating the next move for this pair. Given the fact that we have settled on top of a major Uptrend Line that has been in place since 2012, they will have to especially careful with what takes place next.
In general, whenever trend lines are hit, there is usually a pullback that leads to a trend reversal or a break to continue the existing movement. However, the more significant the Trend Line the greater the likelihood of a reversal to either start a new trend or resume the major trend that had been defined by this Trend Line. With the Currency Pair having hit such a significant Trend Line and the fact that we have also come to the end of the Monthly Range, we are likely to see a strong rally that resumes the overall uptrend.
Such a rally would not take place in a very short time, however, as currencies tend to move sideways in the form of a Range or Pennant before starting a new trend. This tends to happen at major Trend Lines, Weekly & Monthly Ranges and the Support & Resistance of major Consolidations. As such we are likely to see a long period of volatility before a clear trading opportunity takes place. But when it does start, several hundreds of pips are likely to be on offer as they were in this recent downtrend.
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