EUR/CAD Eyes Key Resistance as Buyers Gain Momentum

Market Overview

As of Thursday, the EUR/CAD pair is showing strong buying interest, buoyed by various economic factors. Investors appear to have digested the disappointing PMI figures from the Eurozone on Wednesday. However, stronger-than-expected German factory orders have provided a boost, reinforcing the Euro’s standing as Europe’s economic powerhouse. Additionally, a weaker U.S. dollar, spurred by soft labor market data ahead of the Federal Reserve meeting next week, and a decline in oil prices due to OPEC+’s planned production increase in September have given the Euro an edge over both the U.S. and Canadian dollars. Moreover, the higher interest rates in Europe compared to Canada are also attracting buyers to EUR/CAD, making it a favored choice in the current market environment.

Technical Analysis

On the four-hour chart, EUR/CAD has been trading in a sideways range over the past three days, oscillating between the support at the 34-period moving average at 1.49445 and the weekly high at 1.49930. Given the current market sentiment favoring buyers, the price is approaching the upper boundary of this range. If buyers manage to break through this resistance level, the next target is the 100-period moving average at 1.50062. Continued bullish momentum could push the price towards the 161.8% Fibonacci extension of the last downward swing at 1.50260 and further to the 200% extension at 1.50415.

Oscillator Confirmations

RSI (Relative Strength Index): The RSI is trending upward in the buying zone, indicating strong positive pressure.

MACD (Moving Average Convergence Divergence): The MACD histogram has crossed above the zero line after a long period, and the signal line is also about to cross above zero, suggesting a potential bullish continuation.

Moving Averages: The convergence of the 34 and 100 moving averages reflects a loss of bearish momentum in the short term and signals buyers’ eagerness to push the price higher. However, the current position of the price between these two averages indicates that a clear bullish confirmation is yet to be established.

Alternative Scenario

If sellers regain control, they could drive the price down to the lower boundary of the current range. However, for a bearish trend to establish, the price would need to break below the support at 1.49445, which is below the 34-period moving average.

Key Levels

• Resistance Levels:
  • Resistance 5: 1.50745
  • Resistance 4: 1.50415
  • Resistance 3: 1.50260
  • Resistance 2: 1.50062
  • Resistance 1: 1.49930
• Current Price: 1.49883
• Support Levels:
  • Support 1: 1.49745
  • Support 2: 1.49445

Key Events to Watch

Several key economic events could impact the EUR/CAD pair in the coming days. For the Canadian dollar, the most significant is the U.S. crude oil inventory report, due Thursday evening, which is expected to show a decrease of only 600,000 barrels compared to the previous week. On Friday, traders will be closely watching the Eurozone trade balance, which is expected to improve from the previous month. Additionally, Canada’s unemployment rate and the Ivy PMI are set to be released, with forecasts pointing to a potential increase in unemployment and a slowdown in economic activity.

Conclusion

EUR/CAD is currently testing a critical resistance level as bullish momentum builds. Technical indicators are aligning with the bullish sentiment, but a breakout above the current range is necessary for further upside. The outcome of upcoming economic data from Canada and the Eurozone will play a crucial role in determining the pair’s next move. Traders should remain attentive to these developments, as they could significantly influence market direction.

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