EUR/CAD Outlook: Euro Looks to Breakout from Loonie Strangle
- Lower crude oil prices supportive of EUR/CAD upside.
- More aggressive ECB could alter the recent trend.
EUR/CAD FUNDAMENTAL BACKDROP
The Bank of Canada remains hawkish in its narrative but has not deterred a Canadian Dollar (CAD) selloff as crude oil prices tumbled. This has given currencies like the euro a chance for a reprieve and potential reversal after years off downside. Lower crude prices are not a certainty as the Russia/Ukraine impact brings uncertainty but should the current trajectory hold, EUR/CAD could be in for more upside.
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Another major change could be from the ECB and its openness to more aggressive tightening measures as several officials and analysts forecast 50bps hike by September to tackle inflationary pressures in the eurozone after periphery bond fears have somewhat eased.
EUR/CAD DAILY CHART
Chart prepared by Warren Venketas, IG
The daily EUR/CAD chart above shows price action consolidating in a rectangle pattern (blue) since April but a breakout is looming. A push above rectangle resistance could bring into consideration the 1.4000 psychological zone once again but a move below rectangle support would negate that move.
The EMA levels (20 and 50-day respectively) in purple and blue, are converging and 20-day (purple) crossover with the 50-day (blue) may signal the impending bullish move.
Key resistance levels:
- 100-day EMA (yellow)
Key support levels:
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