Technical Sentiment: Bullish

Key Takeaways

• Market shrugs Canada’s Wholesale Trade numbers;
• Pair confirms range break-out and 200-Day SMA bounce;
• Correction will aim towards 1.4870 and 1.4955.

The recent US Dollar weakness is helping the Euro rebound as the currency grinds steady gains across the board. Traders who shorted EUR/CAD yesterday, based on the 1.2% rise in Wholesale Sales, will soon have to cover their positions as the pair is heading even higher.

Technical Analysis

Although the initial rally above the range resistance at 1.4743 was short lived, the recent Euro strength is bringing enough buyers to make this second run higher appear valid. As EUR/CAD continues to bounce off the 200-Day Simple Moving Average, sellers will eventually have to give up, allowing for bigger rallies.

Daily Stochastic was oversold and it is beginning to exit higher, confirming the low at 1.4669 and the 200-Day SMA bounce. Since the major trend remains bearish, EUR/CAD is expected to search for a resistance in order to make a Lower High (below 1.4955). Only a break above 1.4955 will completely reverse the current downtrend; until that happens bullish expectations should be limited to the first resistance levels.

The nearest possible resistance target is 1.4844, the 61.8% Fibonacci retracement level between 1.4955 – 1.4669 (the last bearish wave). On the 4H timeframe, the 200 Simple Moving Average will descent towards this Fibonacci level, as it is currently priced at 1.4873. The secondary resistance is a major confluence at 1.4955: last Lower Low, pivot zone, 50-Day Moving Average and trendline resistance on the entire downtrend.

*********
Prepared by Alex Z., Chief Currency Strategist at Capital Trust Markets