EURCAD: Downwards to Nowhere
EURCAD Looks Bearish on All Timeframes but Which Support Can Hold It?
The strengthening of the Canadian economy cannot be separated from the success of the government in handling the Omicron variant cases. Meanwhile in other parts of the world, in Europe to be precise, several governments in the blue continent countries had to relax their COVID policies when Omicron infected workers in vital fields. The Czech Republic has allowed key sector workers such as doctors and teachers to go to work even if they test positive for COVID-19. This of course brought the EURCAD rate down fundamentally.
Quick Recap on EUR/CAD
EURCAD compact shows bearish sentiment across all timeframes, signaling a strong trend that will continue until the price finds strong support.
Let's dive in a little deeper to see how EUR/CAD fare on multiple timeframes:
EUR/CAD Monthly Technical Analysis
During 2021, EURCAD has been in a bearish trend and is down by as much as 8%. Now in 2022, it seems that this trend will continue, confirmed by price movements which are still below the 50, 100, and 200 MA lines. Even the December candle rejected the 200 MA and closed bearish, forming a new resistance for EURCAD on a monthly basis with leaving a bottom-wick that large enough. For the month of January, there is a possibility that the price may fall further filling the December wick or fall to its lowest level in November 2021.
EUR/CAD Weekly Technical Analysis
The weekly timeframe shows a stronger bearish trend with the main resistance around 1.45300. The last three candlesticks show the price continues to form lower highs and lower lows from week to week. There is a tendency that the price may head to the level of 1.41700 which becomes a strong support on a weekly timeframe basis.
EUR/CAD Daily Technical Analysis
Meanwhile, on the daily timeframe, we can draw a down trend line that was formed since December 20, 2021. EURCAD had made a fake-out resistance at the level of 1.45300. Even on a daily basis, prices continue to show weakness even though yesterday's candle was closed by a Doji which indicates the strength of buyers and sellers are balanced. The price is also still above the support at 1.43350 which makes EURCAD still in a ranging area since the beginning of 2022.
Trading idea for EUR/CAD
On the H4 timeframe, we can anticipate that EURCAD will retest towards the down-trendline which is also the key level or right shoulder to continue the decline towards weekly support.
Order: Sell Limit
Stop Loss: 1.45000
Target 1: 1.43350 (50% + BE)
Target 2: 1.42500 (25%)
Target 3: 1.41700 (25%)
Risk total: 1-2% Equity (Medium Risk Setup)
Reason: Bearish trend + break and retest down trendline with QM setup.
ZFX Analyst’s Predictions
The Canadian dollar is expected to strengthen over the coming year as the global economy recovers from the COVID-19 crisis, although the increase in the CAD is heavily influenced by the Federal Reserve's interest rate hike. In addition, the maneuver of Canada's big banks to continue to pursue growth will bring progress for Canada at the macro level. For example, the Royal Bank of Canada, Canada's largest lender by market value, is interested in buying wealth distribution businesses in the US and Europe and commercial banking businesses in the US.
In addition, the nature of the CAD as a commodity currency is expected to continue to strengthen along with soaring oil prices in the post-COVID global economic recovery. On the other hand, the Euro, which continues to be shackled to Omicron and a month-to-month PPI figure that is below expectations, will depreciate the value of the Euro. Thus, EURCAD is likely to continue to weaken in the near term.
Risk Warning: The above content is for reference only, and does not represent ZFX’s position. ZFX does not assume any form of loss caused by any trading operations carried out in accordance with this article. Please be firm in your thinking and do the corresponding risk control.
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