EUR/CAD Looks For A Break To The Downside

Key Points:

  • EURCAD breaks through C wave of bullish trend.
  • Downside risks dominate.
  • Expect to see period of sideways moderation before break lower.

The EUR/CAD has been resurgent other the past few weeks as the pair’s price action has been supported by a relatively strong bullish trend line. However, the currency pair could be facing a day of reckoning as it has broken convincingly through the trend line which could see it fall sharply in the coming days.

Subsequently, the coming session is likely to be critical for the pair as it faces some technical challenges from the building bearish pressure. In particular, price action is currently sitting on a relatively important level of support around the 1.4760 mark which, if breached, could see the pair falling sharply towards the 1.46 handle.

Additionally, the moving averages are starting to turn bearish with the 20 EMA turning lower towards the 50 and 100 Moving average lines on an hourly timeframe.

Also, from a fundamental perspective the euro has been under fire of late as poor unemployment and inflation prospects continue to dog the European Union. This has seen capital take a largely risk off approach to some of the systemic problems occurring within broader EU financial markets.

This has very clearly had an impact on most of the euro denominated pairs and this is likely to continue if the rhetoric around a US rate hike causes capital flows ahead of the FOMC decision.

EUR/CAD 60 Minute Chart

However, the hourly timeframe does present some problems for the bearish contention given that MACD and RSI are both at a relatively low level. Subsequently, it is highly likely that we will see a period of sideways moderation or a gentle drift back towards 1.4800 before a sharp move lover. This is already starting to occur with price currently meandering without any trend direction.

Ultimately, keep a close watch for an impending bearish reversal candle to appear as that is likely to provide a relatively strong indication that a challenge to the support zone is about to occur.

Subsequently, the key battleground in the coming days is likely to be the 1.4760 support zone and any concerted breach of this level will see the pair move back towards the 1.4644 target point.

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