Potential Bearish Reversal on EUR/CAD Amid Euro Weakness
24 July 2024
A potential reversal is brewing on the Euro to Canadian Dollar (EUR/CAD) pair. Recently, the Canadian dollar weakened while the euro strengthened, pushing the price to new long-term highs. However, this week, the euro has started losing value, suggesting a possible bearish turn. The current structure resembles a head and shoulders or triple top pattern, with a critical green horizontal support and blue neckline. A breakout below the green support would indicate a false breakout above the previous highs from early June, which could trigger a sell-off targeting the 38.2% Fibonacci retracement and the midterm uptrend line marked in orange.
The significance of this potential reversal cannot be overstated. If the green horizontal support is breached, it would signal that the bullish momentum has exhausted, paving the way for a deeper correction. This scenario is further supported by the weakening euro and strengthening Canadian dollar, which are contributing to the downward pressure on the EUR/CAD pair. Traders should closely monitor these key support levels as the breakout could result in substantial bearish movement.
Should the reversal confirm, traders can anticipate a significant bearish trend, with targets set at the 38.2% Fibonacci level and the midterm uptrend line. This setup offers a compelling risk-to-reward ratio, making it an attractive opportunity for traders looking to capitalize on the shifting market dynamics. As always, it is crucial to wait for confirmation of the breakout before entering any trades.