Big time momentum in favor of EUR/CAD bears today, but now the pair is testing a strong support area on the shorter time frames.
Will the momentum lead to a downside break or is this the opportunity for the bulls to jump back in?
Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on EUR/USD ahead of Euro zone PMI data, so be sure to check that out to see if there is still a potential play!
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US 10-yr 0.613% -0.006 Bund 10-YR -0.423% -0.003 UK 10-YR: 0.29% -0.037 JPN 10-YR: -0.005 -0.017 |
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Fresh Market Headlines & Economic Data:
- US weekly jobless claims hit 4.4 million, bringing 5-week total to more than 26 million
- U.S. House to pass nearly $500 billion more in coronavirus relief
- IHS Markit Flash U.S. Composite PMI – Output contracts at fastest pace in survey history amid COVID19 pandemic
- Fed Focuses on Lending Programs, but Monetary Policy Deliberations Loom
- IHS Markit Flash Eurozone PMI: Unprecedented collapse of Eurozone economy amid virus lockdown
- COVID-19 lockdown leads to record contraction in German economy
- IHS Markit Flash France PMI: Activity decline deepens amid ongoing coronavirus shutdowns
- UK public sector net debt excluding public sector banks increased of £30.5B to £1,804.0B
- UK manufacturers reported the quickest falls in output volumes & total new orders since 2009 – CBI
- UK facing historic economic shock, should recover after virus – BoE’s Vlieghe
- Bank of Japan mulling unlimited bond buying at next meeting -Nikkei
Upcoming Potential Catalysts on the Forex Calendar for U.S. & Asia:
- U.K. Gfk Consumer confidence at 11:01 pm GMT
- Japan Inflation at 11:30 pm GMT
- Japan All Industry Activity index at 4:30 am GMT (Apr. 24)
What to Watch: EUR/CAD
On the one hour chart above of EUR/CAD, the pair broke below a rising ‘lows’ pattern during the Asia session and picked up steam to the downside, likely on a combination of bouncing oil prices and the historically weak European business sentiment released during the European trading session.
This was a pretty hefty drop on the session, already reaching its daily ATR of around 170 pips from high to low, and now testing a previously strong support area that brought in the bulls all throughout April. The question now is, Will it break or are the bulls taking back control here?
Well right now, global risk sentiment is on the side of the Loonie after more stimulus headlines hit the wires this morning, most notably from the U.S. (Fed Focuses on Lending Programs, but Monetary Policy Deliberations Loom) and Japan (Bank of Japan mulling unlimited bond buying at next meeting -Nikkei), and this seems to be the main driver for financial markets at the moment. As long as we don’t get fresh catalysts to shift that focus within the next session or two, the odds are pretty good that the bears will remain in control.
But since we already saw a big move lower on the session, bears may want to be cautious with their entry strategy and consider shorting on a bounce from the current levels or waiting for a downside break/retest/hold/reversal patterns before putting in short orders.
For the bulls, the strong move and previous support area plays into your favor for a potential quick bounce for the rest of the U.S. session on profit taking, but keep in mind that the trend and fundies supporting it area still to the downside.
So, keep your risk pretty light on any short-term long positions unless a fresh catalysts shifts sentiment back to negative, a low probability scenario at the moment.