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EUR/CAD is set to see some action this week with central bank events for both currencies. Will it make the support break legit or a fake out?

EUR/CAD Support Break?

EUR/CAD Daily Forex Chart
EUR/CAD Daily Forex Chart

On the four hour chart above of EUR/CAD, we can see that bearish has picked up over the last week, likely due to the recent push higher in oil prices thanks to OPEC’s lack of big production increases last week.

This was likely the reason why we saw the Canadian dollar outpace the rest of the majors last week, which could continue if oil prices continues its own rally higher.

But we’ve got a top tier catalysts this week to consider for the Canadian dollar, which is the latest monetary policy decision from the Bank of Canada. Expectations are for the BOC to hold interest rates, but any shift in rhetoric on the economy or future policy moves would likely be a big driver for the Loonie short-term.

We’ve also got the latest monetary policy statement from the European Central Bank coming on Thursday, and with expectations that we may see some action by the ECB to limit the rising bond yield situation, it’s highly likely the euro will be jumping around before the end of the week.

For now, we’re looking at the break lower around the area of previously strong interest (around 1.5050) as a potential magnet for more sell orders, but it’s likely choppiness will ensue ahead of this week’s central bank events.

For the bears in EUR/CAD, which we’re leaning more with to play the larger “reopening/recovery” narrative, we’re watching for an opportunity to short on any bounces back above 1.5050. With a weekly ATR of around 200 pips, a bounce higher to 1.5100 – 1.5200 could see run into technical resistance.

If that situation occurs and we get a dovish ECB meeting (i.e., increase in bond purchases / diminished economic outlook) plus a bullish BOC meeting (i.e., hawkish CA economic outlook, no concerns of CAD strength or inflation), then we’ll be on the lookout for bearish reversal patterns before considering a short position on the pair.

Of course, if we see the opposite fundamental scenario play out and bullish reversal patterns form around 1.5050, then we may shift to a very short-term bullish bias, depending on what each central bank says.

What do you all think? Are you watching EUR/CAD for a potential short play? Or do you think the pair will bottom out? Let me know in the comments section below!

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