Technical Sentiment: Bearish
Key Takeaways
- German Factory Orders showed a -3.5% drop;
- Canada Trade Balance posts 1.9B surplus, beating the consensus;
- EUR/CAD tops at resistance, signaling bearish comeback.
EUR/CAD was one of the few pairs where the Euro wasn’t the underdog in recent weeks, however the technical landscape shows the rally has now exhausted and all eyes are turning toward lower levels.
Technical Analysis
Traders bought the pivot zone bounce at 1.4416 – 1.4440, so much so that they’ve managed to put the entire downtrend at risk by pricing a Higher High above the top formed at 1.4651 on July 14th, only to top less than 30 pips higher. 1.4670/80, support level in June, turned into resistance this time around, with four consecutive daily highs topping in this area.
Today’s’ price action, triggered by a weakening Euro and a boosted Canadian Dollar, depicts a strong Bearish Engulfing bar, with clear intentions to test lower levels. Stochastic is signaling a possible decline from overbought territory on the Daily time frame, further confirming the bearish scenario. Zooming in on the 4H chart, Stochastic is quickly approaching oversold territory, although it will easily allow for further losses.
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The first target for sellers will be the cluster at 1.4547/54, formed around the 50% Fibonacci Retracement coupled with the 100 and 200 Simple Moving Averages on the 4H. A deeper breakdown, below 1.4547, will put EUR/CAD back in bearish territory, which could prompt a major return from the bearish trend.
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Prepared by Alex Z., Chief Currency Strategist at Capital Trust Markets
