The EUR/CAD pair tried to fall during the session on Friday, but as you can see bounced and order to form a hammer. The hammer sits just underneath the 1.45 level, and sits upon a fairly decent uptrend line, meaning that this could be an excellent place to see buyers step back into the marketplace, and push the market much higher. We have had a fairly significant pullback, but at the end of the day we are still in a larger uptrend that should continue to go back towards the highs.
A break of the top of the hammer would be a decent buying signal, simply because the risk to reward ratio would be excellent. After all, we could aim all the way for the 1.50 level from that move, as opposed to risking about 50 pips on the downside. These are the type of trades that not too many of them need to work out in order for you to become a profitable trader.
However, there is always the other side.
There is always the other side of the trade, and if we break down below the 1.44 handle, I believe at that point in time the market should continue to go much lower, probably to at least the 1.40 level, if not much lower. Ultimately though, I love trades that setup like this as this is what I refer to as a massive “inflection point.” The market needs to make some type of decision now, and simply letting it do so is the way to trade this market place.
After all, anticipating the next move is an excellent way to lose some money, and I cannot tell you how many times it has hurt me in the past. Because of that, I have learned to simply wait and let the market tell me what it wants to do. This is an example of a marketplace that sees two types of traders get involved, the one to try to anticipate and outsmart the market, and the ones who are profitable by simply doing what the market tells them to do. Because of that, I’m patient, but ready to make my move.