Euro Cross Pick 05.31.2011
The Canadian dollar rallied on Tuesday as the Bank of Canada said monetary stimulus will be ‘eventually withdrawn,’ but I will maintain my long EUR/CAD positions from 1.3762 and 1.3954 as I expected the rebound from the 200-Day moving average to gather pace going forward. As the BoC strikes a balanced tone in its policy statement, we should see the central bank carry its wait-and-see approach into the second-half of the year, and interest rate expectations remain at risk of deteriorating further as policy makers retain their pledge to ‘carefully consider’ future rate hikes. In turn, I am still looking for a test of 1.4102, the 4/28 high, but see a chance for the EUR/CAD to make another run at the 38.2% Fibonacci retracement from the 2008 high to the 2010 low around 1.4370-90.
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