The past few months have been relatively positive for the EUR/CAD as the pair has trended sharply higher in response to a sliding Canadian economy. However, the pair’s price action has just broken down and subsequently penetrated the bullish trend line, in a move that could see it tumbling back towards the low 1.40’s.
Subsequently, the coming session is likely to be highly illuminating as the pair faces both technical and fundamental pressures that could see price action falling further. In particular, the ECB’s MPC minutes are due for release and are likely to highlight some of the sliding economic conditions and increasing risks within the Eurozone. In contrast, the major economic data point due out from Canada this week is the Wholesale Sales metric which is expected to meet market forecasts at 0.2% m/m.
From a technical standpoint, the rampantly bullish EUR/CAD may finally be signalling a reversal as the pair has broken through the medium term bullish trend line. Tuesday daily candle saw price action dropping sharply and breaching the key trend. Further supporting the bearish push were both the RSI and Stochastic oscillators which are trending strongly lower in response to the declining price action. In addition, the 12 and 30 EMA’s are also signalling building bearish activity as both indicators have crossed on the downside.
The key battleground in the coming days is likely to be the strong support zone around the 1.4950 level. This is a key level which resisted a downside move back in January and could potentially be a stumbling block in the days ahead. However, if the EUR/CAD is able to break through this level, expect a sharp move back towards the profit zones of 1.4230 and 1.3030.