EUR/CAD Slides Following Bearish Channel Break

Market Overview

In Europe, the euro is trading near its lowest level in a year, as ongoing political uncertainty in Germany and the risk of potential U.S. tariffs cast a shadow over the single currency. The collapse of Chancellor Olaf Scholz’s coalition government has led to early elections in Germany, scheduled for February 23. This political turmoil, combined with concerns of a potential trade war with the U.S. under the new Trump administration, is weighing on the euro’s outlook.

Technical Analysis

The EUR/CAD pair has broken below its descending channel on the daily chart, reaching the 127.2% Fibonacci extension at 1.48093. This level has provided some temporary support, but the outlook remains bearish as price action suggests the potential for further declines. Any bounce is likely to be capped as sellers look to retest the breached lower boundary of the channel, which has now become resistance.

If sellers successfully break below 1.48093, the next downside targets lie at the 161.8% Fibonacci level at 1.47111, followed by the 200.0% Fibonacci extension at 1.46028, and then 241.4% at 1.44854. These levels will be crucial for assessing the strength of sellers and will likely serve as decision points for future moves.

Conversely, should the price manage to recover and re-enter the broken channel, key resistance levels are found at 1.49947 (61.8% Fibonacci retracement) and ultimately at 1.51700, which coincides with the channel’s upper boundary. Breaking these resistance levels would signal a potential shift in trend.

Technical oscillators also confirm the prevailing bearish sentiment. The RSI sits at 35.09, indicating a weakened momentum, with the pair approaching oversold territory. This suggests a possible short-term pullback, but selling pressure remains predominant. The MACD is in negative territory, with a bearish cross reinforcing the downward bias and signaling continued momentum to the downside.

In conclusion, EUR/CAD remains in a bearish phase, and the probability of further downside movement is high as long as the price remains below the lower channel boundary.

Key Technical Levels Overview

Resistance Levels:

• Resistance 1: 1.48864
• Resistance 2: 1.49947
• Resistance 3: 1.51700

Current Price: 1.48220

Support Levels:

• Support 1: 1.48093
• Support 2: 1.47111
• Support 3: 1.46028
• Support 4: 1.44854

Key Events to Watch

With no major events scheduled for the Canadian dollar, market participants will focus on preliminary Q3 GDP data out of Europe on Thursday and ECB President Lagarde’s speech, which may provide insights into the central bank’s policy outlook.

Conclusion

EUR/CAD’s trend remains bearish following a break below its descending channel. Further downside is likely unless bulls can reclaim the lower boundary of the broken channel, signaling a potential recovery.