Technical Sentiment: Bearish
- Euro wanes as German Ifo Business Climate declines to 110.4 vs. 111.0 forecast;
- The Canadian Dollar dismissed Thursday’s disappointing Retail Sales figures;
- EUR/CAD forming a double bottom formation unless the bearish trend continues.
Euro shorts have reaped the benefits of getting it right in the last few weeks. Market sentiment remained bearish for EUR/CAD even after the Core Retail Sales barely increased 0.1% in March and Retail Sales m/m decreased by 0.1%. It remains to be seen if today’s Core CPI and CPI m/m, both with lower forecasts than previous readings, will stop the Canadian Dollar from gaining more ground.
EUR/CAD is currently trading above 1.4850, after dipping within several pips of May 15th low of 1.4832. At this point it appears the market simply expects both the Core CPI and CPI m/m to be within expectations or below, in order to form a double bottom reversal pattern in this area. Stochastic is in oversold territory on both the Daily and 4H time frames, suggesting the bearish cycles might be over and a bullish correction can ensue.
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A bounce here for EUR/CAD will lead to a test of the large round number 1.5000, a level that will soon coincide with the 100 Simple Moving Average on 4H. This resistance is followed by 1.5100/19, 38.2% Fibonacci Retracement on the entire downtrend from March and 200 Simple Moving Average on 4H.
If EUR/CAD breaks below the 1.4832 support instead, the pair will quickly touch the price pivot zone at 1.4788, and if this fails as well then the 200-Day Moving Average (1.4637) will become a viable target for shorts in the near term.
Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets