FxWirePro: EUR/CAD bears slipping through sliding channel after “shooting star” occurrence – “CPS” seems attractive to speculate

On both monthly and daily charts of EURCAD, we spot out prices moving in sync with indications of one another.

Well, we refer a “shooting star” pattern candle formed at peaks of 1.5127 on monthly plotting to highlight a caution for bulls. As a result, we could make out the consistent price drops since then.

These bearish swings have been slipping through a sliding channel, testing 21DMA and upper channel line as a stiff resistance.

The current prices are rejecting again at 21DMAs today to signify the weakness, as a result, the price drifts sideways to downswings.

In addition to that, leading oscillators are showing convergence with the price dips on the daily and monthly chart.

RSI looks healthily converging with every price declines below 50 levels; it has been showing the same indication right from overbought territory. So, RSI signifies no deviation but the prevailing down streaks may sustain for some more slumps in the weeks to come.

While another leading oscillator (slow stochastic) hints us the overbought heaviness through %D crossover at 40 levels, so the bears don’t seem to lose rallies built by healthy volumes.

Lagging indicators, on the other hand, have been quite indecisive but certainly not bulls favour.

The current prices on monthly charts also slid below 7EMA.

FX Option Trade Tips:

1w ATM IVs of EURCAD is just shy above 10%, and likely to spike higher 10.75% in 2w tenor.

So, using any abrupt rallies, you decide to initiate a bull put spread at net credits.

The execution: Initiate shorts in 1W (-1%) in the money put with positive theta if you expect that EURCAD would spike up moderately over the next near future but certainly not beyond your upper strikes, simultaneously, buy 2W  out the money -0.5 delta put option.

Please be noted that in this instance that the put we bought is out of the money and the put we sold is in the money with an anticipation of EURCAD could rise or remain unchanged, and there onwards any dramatic fall would be taken care by longs in OTM put and your active longs in spot FX would be protected.

Maximum profit: The initial credit received for this trade which is certain, after 1W, if it continues its bearish business cash flows would be exponential. The maximum risk is the difference between the two strike prices, minus the credit you received.