With COVID developments leaning negative in Europe and Euro area PMI’s coming this week, the euro could be in for bearish pressure. And with the Canadian Dollar in a longer-term trend higher, EUR/CAD‘s bounce is one to watch for a potential short-term play.
Downtrend Pullback in EUR/CAD
On the one hour chart above of EUR/CAD, we can see a clear move higher from last week’s lows formed around the 1.4800 major psychological handle. The rally was likely sparked by oil’s sell-off last week from 2021’s high just under $68/barrel for WTI, a reaction to increasing oil inventory and fears of Europe’s slowdown as COVID cases rise again.
This week, the focus for EUR/CAD could shift from oil to the euro’s moves as the COVID vaccine/cases situation in Europe remains highly uncertain (e.g., German tourist industry warns of job losses from tighter pandemic lockdowns, As vaccine battle with UK deepens, EU blames AstraZeneca), and as we get the latest PMI data from the Euro area. Expectations are for a net dip lower in sentiment, which could put pressure on the euro later in the week.
As for oil, we’re currently seeing support for WTI crude just under the $60/barrel level, but if bond yields remain kept in check from rising and the upcoming oil inventory data shows a pullback in levels, then the Loonie has a good chance to bounce this week.
Until then, we’re expecting EUR/CAD to reach the 61% Fibonacci retracement on the chart above as oil continues to weaken, and if that area up to 1.5000 holds as resistance, we’ll consider a short play after bearish patterns form, bond yields turn lower, AND if European sentiment data disappoints as expected. For now, we’ve got our alerts set and waiting to see what the market gives us.
What do you all think? Are you watching EUR/CAD to play the longer-term trend lower? Or is this just the beginning of a swing move to the upside? Let me know in the comments section below!
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