EUR/CAD Trading & Hedging Setup As Bears Sits At Channel Support

During last weekend, EURCAD bears have threatened by sliding price below 7-SMAs, the pair has dipped about 125-130 pips (i.e. -0.55%), currently trading at 1.4664 levels.

While the spinning top and bearish engulfing have occurred at 1.4756 and 1.4689 levels respectively. 

These bearish pattern candles threaten bulls by plummeting prices below SMAs with bearish crossovers, on the contrary the oversold sentiment cushions the minor trend.

On a broader perspective, the major trend spikes through ascending channel, the current price have slid below EMAs and hovering at channel support (refer monthly plotting).

Any breach below channel support most likely to signal further price slumps up to 1.4333 (i.e. 100-EMAs), while both leading and lagging indicators are bears' favour on this timeframe.

Trading & Hedging Setup: On trading perspective, at spot reference: 1.4664 levels, we advise tunnel options spreads with upper strikes at 1.4680 and lower strikes at 1.4642 levels.

Hence, contemplating above factors, BoC monetary policy is scheduled for the next week, we advocate shorts in EURCAD futures contracts of December’19 delivery as further downside risks are foreseen and with a view of arresting potential price slumps and simultaneously, add longs in futures January’19 on hedging grounds. 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.