FxWirePro: EUR/CAD tight trades upon bullish/bearish engulfing candles at stiff resistance – Trade Boundary Strikes and directional hedges

EURCAD has bottomed out at strong support at 1.4876 levels. Bullish engulfing pattern candle has occurred at 1.5067 levels, this bullish pattern candle takes-off rallies above DMAs with bullish DMA crossover. Consequently, bulls break-out stiff resistance of 1.5048 levels.

On the contrary, hanging man and bearish engulfing patterns have popped up at the peaks of rallies.

For now, the extension of rallies seems to be unlikely on the overbought pressures signaled by the momentum oscillators (refer 4H chart). 

While the trend indicator also (bearish MACD crossover) signal minor downtrend likely to extend further to substantiate leading oscillators, the current prices are also sliding below 7-DMAs.

On a broader perspective, please be noted that the major trend has been developing in the ascending channel. The occurrences of shooting stars exactly at channel resistance followed by dips and hammers pop-up quite often at the channel support in the recent past (monthly plotting) have been prolonging the rising channel pattern. The formations of both bullish and bearish engulfing candles at the stiff resistance of 1.5585 levels.

The current price on this timeframe is attempting to spike above EMAs, whereas MACD shows bearish crossover in the bullish territory. RSI shows gaining strength at 48 levels & losing strength at 62 levels. 

Overall, all these technical signals and candlestick patterns indicate that one can expect minor dips in the major uptrend.

Trade Tips: Contemplating above technical rationale, at spot reference: 1.5099 levels, it is wise to deploy boundary binary options strategy, using upper strikes at 1.5125 and lower strikes at 1.5077 (i.e. 21-SMA levels). The strategy is likely to fetch leveraged yields as long as the underlying price remains between above strikes on the expiration.

Alternatively, on hedging grounds, we advocate initiating shorts in EURCAD futures contracts of Mar’19 delivery as further downside risks are foreseen and simultaneously, longs in futures of Aprl’19 delivery. Thereby, one can directionally position in their FX exposures. The directional implementation of the same trading theme by further allow for a correlation-induced discount in the options trading also if you choose strikes appropriately.

Currency Strength Index: FxWirePro's hourly EUR spot index is flashing at 3 (which is neutral), while hourly CAD spot index was at -52 (bearish) at 07:41 GMT.

For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex