The EUR/CAD pair exhibited significant volatility yesterday, with the market driving up to 70 pips before retracing over half of those gains. This price action, characterized by indecision, continues today as traders await crucial economic announcements that could determine the pair's next direction.
Yesterday, EUR/CAD experienced substantial volatility, with a notable 70-pip upward movement followed by a retracement of over 50% of the gains. This price action highlights the market's uncertainty about whether to sustain the upward momentum or reverse. Such indecision has persisted into today, indicating that market participants are cautious and waiting for more definitive signals.
Today's trading landscape is significantly influenced by key economic data from both the Eurozone and Canada. The European Central Bank (ECB) is set to announce its interest rate decision and Deposit Facility rate. Economists forecast a cut in the deposit facility rate to 3.75% from the previous 4.00% and a reduction in the interest rate to 4.25% from 4.50%. These anticipated changes are crucial as they can significantly impact the Euro's strength and the broader economic outlook for the Eurozone. On the Canadian side, the release of the Trade Balance figures is eagerly awaited. Economists are forecasting a slight increase in Canada’s Trade Balance compared to the previous period. This data is critical as it reflects the health of Canada’s economy and can influence the Canadian Dollar’s performance.
Technically, the EUR/CAD pair shows bullish sentiment on the hourly chart, as indicated by the Exponential Moving Averages (EMA). The EMA 50 is positioned above the EMA 200, suggesting a continuation of the bullish trend. Additionally, the Ichimoku Cloud analysis supports this sentiment, with the Chikou Span, Kijun Sen, and Tenkan Sen all positioned above the cloud.
The key level support to watch is at 1.4850, highlighted in a green rectangle. A break below this level would be a significant indicator of a bearish reversal, potentially signaling a shift in market sentiment.
While the EMA and Ichimoku indicators suggest bullishness, the oscillators show potential signs of a bearish reversal. Both the MACD and RSI indicators exhibit bearish divergence. This occurs when the price makes a new high, but the indicators do not follow suit, instead showing lower highs. This divergence suggests weakening momentum and the possibility of a trend reversal.
For confirmation of the bearish divergence, traders should look for a break below the key level support at 1.4850 or for both the MACD signal line to cross below the zero line and the RSI to drop below 40%.
Given the current sideways price action within a narrow 20-pip range since the Asian trading session, there is a potential breakout opportunity. The upcoming ECB interest rate decision is likely to provide the necessary clarity and catalyst for the next major move. A dovish ECB decision could lead to a bearish reversal, while a more hawkish stance could support a continuation of the bullish trend.
In conclusion, EUR/CAD is at a critical juncture with significant indecision in the market. The key economic data releases today, particularly from the Eurozone and Canada, will be instrumental in determining the pair’s direction. Traders should closely monitor the key support level at 1.4850 and the potential bearish divergence in the oscillators. The ECB's interest rate decision will likely provide the decisive signal needed for the next move in EUR/CAD.
Actual 4.3% vs Forecast 1.2% vs Previous 3.5%
Actual 6.548B vs Forecast 5.370B vs Previous 4.841B
Forecast 220K vs Previous 219K
Forecast -76.20B vs Previous -69.40B
Forecast 4.7% vs Previous 0.4%
Forecast 1,790K vs Previous 1,791K
Forecast -1.20B vs Previous -2.28B
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