- EURCAD prolonged its recent pullback from levels just ahead of the 1.6000 handle.
- The formation of a descending channel points to a well-established bearish trend.
- The set-up supports prospects for a slide towards 1.5400 mark (channel support).
- Fresh bearish positions should be accompanied by stop-loss near 1.5555-60 area.
EURCAD has been trending lower along a downward sloping channel over the past one-month or so. This comes on the back of the formation of a bearish double-top ahead of the 1.6000 handle and last week’s rejection slide from the top end of the mentioned channel. This coupled with bearish oscillators on hourly/daily charts point to a well-established bearish trend.
Hence, some follow-through weakness towards challenging the trend-channel support, around the 1.5400 handle, now looks a distinct possibility. The mentioned handle coincides with the 61.8% Fibonacci level of the 1.5054-1.5978 positive move, which if broken will set the stage for an extension of the recent slide from multi-month tops set on July 31.
The pair might then turn vulnerable to slide further towards the 1.5200 mark. Intermediate support levels are pegged near the 1.5350-40 region ahead of the 1.5300 handle and the 1.5275 horizontal level.
On the flip side, any meaningful positive move back above the key 1.5500 psychological mark (nearing 50% Fibo. level) might remain capped near the 1.5555-60 region (trend-channel resistance). This, in turn, should act as a stop-loss level for bearish traders, above which the pair is likely to move back above the 1.5600 mark and retest the 1.5630-40 confluence resistance (38.2% Fibo. and 200-SMA on the 4-hourly chart).