EUR/CAD Buyers Face Key Resistance at Double Bottom Neckline

Market Overview

The euro is regaining ground against the Canadian dollar as oil prices retreat, diminishing the commodity-linked support for the Loonie. This shift has provided EUR/CAD buyers with an opportunity to halt the two-week downtrend, as the pair approaches a critical resistance zone.

With investors closely monitoring European Central Bank (ECB) policy signals, the euro’s performance hinges on expectations surrounding future rate cuts. Meanwhile, the Canadian dollar remains vulnerable to fluctuations in crude oil prices, as oil-backed sentiment continues to influence market positioning.

Technical Analysis

EUR/CAD has broken above its descending trendline in the four-hour timeframe, signaling a potential trend reversal. Buyers have stepped in following a failed attempt to breach the 1.47442 support, pushing prices toward a key resistance at 1.48150, which also acts as the neckline of a developing double-bottom pattern.

A sustained breakout above this neckline would confirm a bullish reversal, setting up further price targets at 1.48343, 1.48588, and 1.48858. These levels align with the 127.2%, 161.8%, and 200% Fibonacci extensions, calculated from the latest corrective swing.

Momentum indicators suggest increasing upside potential. The RSI has formed a failed swing low, hinting at a potential reversal, while the MACD divergence reinforces the likelihood of further gains. However, unless EUR/CAD decisively clears the 1.48150 resistance, a breakout remains unconfirmed.

If sellers defend this resistance, range-bound consolidation may persist, with downside risks intensifying should the pair drop below 1.47442, which would invalidate the bullish structure and resume the broader downtrend.

Key Technical Levels

• Resistance Levels: 1.48150 (Key Neckline), 1.48343, 1.48588, 1.48858
• Support Levels: 1.47880, 1.47442 (Critical Breakdown Zone)

Fundamental Drivers

ECB Rate Policy Signals: The market is awaiting Frank Elderson’s remarks on Wednesday, which may offer insights into the ECB’s rate-cut trajectory ahead of the ECB Economic Bulletin release.

Oil Price Movements: A prolonged decline in crude oil prices could further weaken the Canadian dollar, supporting EUR/CAD upside.

Global Risk Sentiment: Uncertainty surrounding global growth and interest rate expectations continues to shape capital flows into defensive assets like the euro.

Conclusion

EUR/CAD remains bullish in the short term, with 1.48150 acting as a key decision point. A break above this level confirms a reversal, targeting higher Fibonacci-based extensions. However, failure to breach resistance could trigger a range-bound phase, leaving 1.47442 as a crucial level for downside risks. ECB comments and oil price trends will be key catalysts for the pair’s next move.

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