Canadian crosses have seen whippy price action lately, impacted by mixed NAFTA-related headlines and volatility in oil prices, which often have some bearing on the Canadian dollar.
As I wrote on Wednesday’s post, for EURCAD: “….Therefore, if the pair sustains its move above 1.5200 today, therefore is likely to face within a day, a move higher up to next Resistance area, at 1.5250-1.5265. In longer time-frame, a move to the upside may meet Resistance around the 50-simple moving average, 1.5380 in the Daily chart. Immediate support for further declines may be taking place at 1.5130. Therefore the upwards trend needs further confirmation, in order to validate the end of the 2-month downtrend.”
Undoubtedly, the pair retested yesterday the 50-DAY SMA and 38.2% Fib. level, by reaching up to 1.5360. Today however, it reversed nearly 75% of the gains earned, driven back below PP level and the round 1.5300 area from R1 high. Fundamentally-wise, today’s weakness was driven on the view that trade tensions are likely to worsen before improving, and that this will likely be in evidence at the G7 meeting this weekend. Some political pundits have been pondering that there is a chance that President Trump will throw a bone to some of the vociferous pro-trade Republican party members by making Canada exempt from tariffs, though Trump’s recent tweets on trade suggest otherwise (accusing Canada and France of imposing “massive tariffs” and non-monetary barriers on U.S. imports).
The negative bias noticed today, is supported also by the anticipation of the May employment report. From the technical point of view, further hourly weakness is likely to be seen, as the hourly Bollinger Bands pattern are extending to the downside, while EURCAD is currently traded below 50-period SMA. The RSI is sloping slightly to the oversold territory, while the MACD oscillator is edging lower below its trigger line but above the zero line. The next immediate support levels come at 1.5240 and 2-days support at 1.5200.
Overall, the pair remains in positive territory, as long as EURCAD keeps holding above the significant 1.5200 level, which is the confluence of 200-Day SMA and 23.6% Fib. level. The Daily RSI holds above neutral zone, while MACD oscillator decreases in the negative territory and above its signal line, suggesting that momentum to the downside is extremely weak in long-term.
If price closes above support 1.5240 today, then this could trigger a “buy the dip” trade. Furthermore, it could reinforce the long-term bullish view and open the way towards the 50-DAY MA again, at 1.5380, which coincides with the 38.2% Fibonacci retracement level.
However, in case of strong further declines in the pair, would open the way towards the 20-DAY MA and next support near 1.5080 barrier.
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