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We’ve got quite a few bearish technical arguments showing up on EUR/CAD that may align with a potential shift towards positive broad risk sentiment.

Downtrend Bounce in EUR/CAD

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

Today, we’re checking out the longer-term chart in EUR/CAD, which has been in a solid downtrend all year.  The bears have likely been benefitting from the broad recovery in Canada & oil prices (WTI futures up 54% YTD) from the pandemic, while the euro continues to see issues with pandemic cases and other issues hurting Europe like the current energy crisis.

It looks like these themes are not likely to change anytime soon, and with the rise of the Omicron variant suppressing positive risk sentiment over the past month, the downtrend in EUR/CAD looks more favorable to play at better prices.

At current levels, the market is retesting the Fibonacci retracement area of the most recent strong move lower from roughly 1.5100 – 1.4200, which happens to line up with the falling 100/200 moving averages. We can also see a slight bearish divergence forming between the stochastic indicator and price action.

Overall, with a solid technical argument that could draw in sellers, playing the downtrend looks like solid play IF broad risk sentiment can turn around. And lately, we’re getting headlines that are starting to shift the perception on Omicron (Omicron study in U.K. bolsters evidence of lower hospital risks), as well as news that covid treatment pills for high risk patients are starting to be approved for use. If we continue to see this trend in the headlines, then the risk sentiment and bullish CAD sentiment could potentially improve.

What do you all think? Is this the short-term top for EUR/CAD? Will pandemic news start to shift positively and bring back risk-on traders? Or will EUR/CAD creep on higher for now? Let me know in the comments section below!

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.