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EUR/CAD Tests Critical Uptrend Support Amid Political Uncertainty and Inflation Woes

EUR/CAD Tests Critical Uptrend Support Amid Political Uncertainty and Inflation Woes

Date: Thursday, June 20, 2024 

Thursday Market Overview: 

The EUR/CAD pair faces significant selling pressure as political uncertainties in Europe continue to weigh on the euro. At the same time, oil prices have stabilized near their seven-week highs, providing support for the Canadian dollar. Recent inflation data meeting expectations and a decline in German producer prices—a leading indicator—have fueled speculation about potential interest rate cuts in Europe. In contrast, Canada is grappling with one of the largest housing market inflation bubbles in half a century, making monetary support more probable for the Canadian economy than for Europe. 

Technical Analysis: 

On the daily chart, EUR/CAD has lost support at 1.47543 during its correction within a seven-month uptrend. This former support has now turned into a significant resistance level. This week, the price rebounded from this area, heading downwards towards the ascending trendline support near the key level of 1.46804. If this level fails to hold, a clear and sustained break would expose lower targets at 1.46603, 1.46301, and 1.46065. The bearish momentum is indicated by the consistent downward movement, with oscillators showing increased selling pressure. 

Alternative Scenario: 

Should the support at 1.46804 hold, the price is expected to oscillate between this level and the resistance at 1.47543, potentially consolidating before a new directional move. A break above 1.47543 would be required to signal a resumption of the previous uptrend. 

Market Overview and Key Levels 

Resistance Levels: 

  • Resistance 2: 1.47543 
  • Resistance 1: 1.47086 

Current Price (at the time of analysis): 1.47005 

Support Levels: 

  • Support 1: 1.46804 
  • Support 2: 1.46603 
  • Support 3: 1.46301 
  • Support 4: 1.46065 

Impactful Events: 

In addition to the reports related to the housing market and the weekly US jobless claims, which indirectly affect the EUR/CAD pair, the weekly crude oil inventory report on Thursday and the Eurozone Purchasing Managers’ Index (PMI) reports on Friday are among the most significant events influencing this currency pair. These reports could cause notable volatility. 

Oscillators and Risk Warnings: 

  • RSI (Relative Strength Index): Bearish, indicating ongoing selling pressure. 
  • MACD (Moving Average Convergence Divergence): Bearish, suggesting continued downward momentum. 
  • Moving Averages: Bearish, reflecting the current negative price action. 

Conclusion: 

The EUR/CAD pair is currently testing a critical support level amid a backdrop of political uncertainty in Europe and contrasting economic conditions in Canada. A break below the 1.46804 support level could confirm further downside, with targets at 1.46603, 1.46301, and 1.46065. However, if buyers defend this level, a period of consolidation between 1.46804 and 1.47543 is likely before a clearer directional bias emerges. 

Traders should closely monitor the upcoming economic reports and key technical levels to navigate potential market volatility effectively. By staying attuned to these indicators and broader economic trends, investors can make more informed decisions in the current market environment. 

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