Short-Term Bearish Pressure on EUR/CAD Ahead of Inflation Reports

Market Overview

The EUR/CAD pair is facing renewed selling pressure amid diverging economic outlooks in the Eurozone and Canada. Recent data from the Eurozone highlights a slowing economy, weighed down by falling global demand and internal challenges such as high unemployment and declining industrial production. These factors have exerted downward pressure on the euro. In contrast, Canada’s economy is showing resilience despite falling crude oil prices, one of its primary exports. Strong employment figures and increased business investment have lent support to the Canadian dollar. Thus, on November 19th, EUR/CAD is expected to remain under bearish pressure, as economic weakness in the Eurozone might lead to a continued decline of the euro against the Canadian dollar.

Technical Analysis

The short-term uptrend in EUR/CAD on the four-hour chart was disrupted after sellers broke below the key support at 1.48437. The price has now settled below this level and is testing the 127.2% Fibonacci support at 1.48326, which overlaps with the 100-period moving average. If these support areas break, the likelihood of further declines increases. Key downside levels include 1.48185, 1.48029, and 1.47860.

Oscillators Confirmation

Momentum indicators also indicate sustained selling pressure. The RSI is currently at 41.23, suggesting considerable selling strength, although it has not yet entered the oversold territory. This implies there is still more room for further downside movement. Meanwhile, the MACD is in negative territory, with the signal line crossing downwards—confirming the continuation of bearish momentum. Both indicators are clearly supportive of the ongoing downtrend.

Alternative Scenario

To change the prevailing bearish trend, the price would need to break above the 61.8% Fibonacci resistance at 1.48593, followed by a break through the recent high at 1.48845. Such a move would challenge the current downtrend and increase the likelihood of a bullish reversal.

Key Support and Resistance Levels

Resistance Levels:

1.48845 – Recent high, crucial for challenging the downtrend.
1.48593 – 61.8% Fibonacci level, key for reversing bearish sentiment.
1.48437 – Previous support now acting as resistance.

Support Levels:

1.48326 – 127.2% Fibonacci support, overlaps with the 100-period moving average.
1.48185 – Potential next target if bearish momentum continues.
1.48029 – Key support for continuation of downward pressure.
1.47860 – Further support level to monitor in a continued bearish scenario.

Key Events to Watch

On Tuesday, November 19th, several significant economic events could greatly impact the EUR/CAD pair. One of the key events is a speech by Elderson, a member of the European Central Bank (ECB) Executive Board. This speech might provide insight into the ECB’s approach to the current economic conditions in the Eurozone. Any mention of economic concerns or the need for further monetary easing could exert more pressure on the euro.
Inflation data for the Eurozone will also be released, including both core annual and monthly CPI figures. Projections suggest core annual inflation will remain at 2.7%, with headline inflation at 2.0%, consistent with previous readings, indicating stability in Eurozone prices. However, if these numbers come in lower than expected, it could weaken the euro and increase bearish pressure on EUR/CAD.
In Canada, inflation data is also set for release on the same day. Core annual inflation is forecast at 1.6%, while monthly inflation is expected to be 0.3%. Stronger-than-expected data would indicate higher-than-anticipated inflation, which could prompt tighter monetary policy by the Bank of Canada (BoC). This scenario would boost the Canadian dollar and apply additional downward pressure on EUR/CAD.
Overall, with inflation data from both the Eurozone and Canada on the horizon, the expectation is that weaker Eurozone inflation data combined with stronger Canadian data could further exacerbate the EUR/CAD downtrend. Given the current conditions and forecasts, the likelihood of a stronger Canadian dollar and continued euro weakness appears high unless Elderson’s speech contains unexpected positive signals for the euro.

Conclusion

EUR/CAD is under short-term bearish pressure, with sellers having broken below key support levels. The outlook remains negative unless the pair manages to reclaim key resistance levels. Inflation data and comments from the ECB this week will be crucial in determining the next leg for this pair.