The euro continued to outperform for much of today’s session after top ECB policymakers delivered hawkish remarks on the eurozone economy this week, leading to some chatter that the central bank may announce its intension to end EQ at the end of the year at the conclusion of next week’s policy meeting.
The single currency has performed particularly well against the Canadian dollar, which has been undermined by continued uncertainty over NAFTA negotiations and recent volatility in oil prices.
The Canadian dollar will be in sharp focus from tomorrow as the G7 meetings get underway in Quebec where a range of global economic issues will be discussed, including trade relations and tariffs. In addition, Statistics Canada will publish the nation’s employment figures tomorrow which should provide some volatility for the CAD, especially if the headline change in jobs deviate significantly from the +19,100 expected.
Ahead of the above fundamental events, the EUR/CAD has been pushing higher ever since the false breakdown reversal pattern was made below the 1.50 handle at the end of last month. Since then, the EUR/CAD has been rising for most of the time and as a result, it has broken out of its bearish channel. The breakout has also helped to fuel a rally above the 200-day moving average and resistance in the 1.5220-1.5350 range. This area is now going to be the key support zone to watch. The bullish bias would remain intact for as long as we remain above this area, unless price forms a distinct bearish reversal pattern at higher levels first.
At the time of writing, the EUR/CAD had risen to test important resistance between 1.5350 and 1.5390. The lower end of this range was a prior support while the upper end corresponds with the 38.2% Fibonacci retracement level. Given the extent of today’s move higher and ahead of Canada’s key jobs data tomorrow, don’t be surprised if the EUR/CAD were to form today’s high around this resistance zone.
Still, given the current bullish bias, the path of least resistance is to the upside. As a result, we expect the 1.5220-1.5250 support range to hold and for price to subsequently head towards the next resistance at 1.5470 in the due course. The key risk to this short term bullish forecast is Canada’s employment figures tomorrow.