EUR/CAD surges as oil drops; Trump, BOC in focus

The sharp drop in the price of oil has weighed heavily on the oil-linked Canadian dollar today. The USD/CAD has surged above 1.3200 handle and was heading towards 1.3280 resistance at the time of this writing. The USD/CAD’s rally has come despite an otherwise down day for the US dollar, which has been hurt by soft data and anxiety ahead of President Donald Trump’s speech tonight.

But the Canadian dollar may weaken more if oil falls further or Donald Trump delivers more protectionist US government policy promises, detrimental to its neighbours. The biggest risk however is the Bank of Canada’s rate decision on Wednesday – any surprise rate cut or a dovish statement could send the CAD plunging.

But with a strong possibility we may see a volatile overnight session in the US dollar, traders may be better off taking the greenback completely out of the equation and instead concentrate on a CAD cross, such as the EUR/CAD.

Now the EUR/CAD has broken its bearish trend line after forming an apparent bottom formation at around the 1.3800/20 area on Monday.  Now near the 1.41 resistance level, we could see a sharp short squeeze rally if this level also breaks and force the sellers to abandon their positions. But with the EUR/CAD already significantly higher on the day, traders may wish to proceed with a bit of care now.

We are on the lookout for either (1) a pullback to 1.3960 support then a bounce or (2) a clean break above 1.4100 and then a rounded re-test. We think the EUR/CAD may be heading towards 1.4230 resistance in the coming days ahead of the prior swing high points at 1.4305 and 1.4360. But a potential daily close below 1.3920 support would invalidate our short-term bullish outlook. 

Source: eSignal and FOREX.com

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.