Volatility picked up quickly this week in EUR/CAD, breaking the pair out of a May and June slumber. Will that action continue with economic updates ahead from both Europe and Canada?
EUR/CAD Rally Pullback Ahead?
Global risk sentiment has been the main driver for currencies this week, but that may change soon for EUR/CAD with top tier economic updates coming soon on the forex calendar. The most notable event is the latest monetary policy decision from the European Central Bank on Thursday, and expectations are for the ECB hold off on policy changes, a scenario that grows in probability as covid-19 cases continue to spike higher. But the potential surprise from the event is that they may change
We’ve also got Canadian retail sales data and Eurozone PMI‘s coming on Friday to potentially keep EUR/CAD on their toes ahead of the weekend, with expectations that data points from both will likely disappoint relate to previous readings.
Overall, if data does indeed disappoint, then it’s likely the euro will outperform the Canadian dollar, but not before a potential euro dip if the ECB signals the potential for extending quantitative easing measures.
We think that if these scenarios play out in that sequence, that lines up with the technical setup on the four hour chart above, where EUR/CAD may potential dip from this week’s strong rally. If so, it could run into a potential support area around the broken previous swing high, Fibs and rising ‘lows’ pattern marked on the chart above.
We’ll be setting our alerts for that price action and if that plays out followed buy bullish support candles and continued broad negative risk sentiment, we’ll consider a long swing or longer-term position from there depending on the ECB event.
What do you all think? Is EUR/CAD a buy? Will the ECB signal more QE ahead? Will Eurozone PMI’s disappoint as expected? Let me know in the comments section below!
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