EUR/CAD, FTSE forecasts: Two trades to watch

EUR/CAD falls after OPEC+ cuts oil output 

• CAD boosted by gains in oil after OPEC+ output cut 
• CAD & EUR manufacturing PMI data due 
• EUR/CAD tests multi-month rising trendline support 

EUR/CAD is falling, extending losses from the previous week, as investors digest a surprise move over the weekend by OPEC, cutting oil output by 1.16 bpd. 

Remove comes in addition to OPEC’s previously agreed 2 million bpd production cut, putting the total cut at 3.16 million barrels which equates to around 3.7% of global demand. The decision has boosted oil prices by over $5 in early trade, lifting the loonie. 

Looking ahead, attention will shift to Canadian manufacturing PMI data after activity expanded at a slower pace of 51.4 in March after expanding in February at 52.4. 

The data comes after GDP data on Friday showed that the Canadian economy grew at a faster pace than expected in January of 0.5%, after contracting -0.1% in December. Stronger growth and higher oil prices are at odds with the BoC’s recent decision to pause rate hikes.  

Canadian jobs data will be in focus on Thursday, and a strong labour market could fuel bets that the BoC could resume rate hikes. 

Meanwhile, the euro is trading under pressure, extending losses from Friday when inflation cooled by more than expected to 6.9% YoY, down from 8.5% thanks to falling energy prices. Still, with core inflation proving to be very sticky, the ECB is likely to keep hiking rates.  

While rising oil prices could be good news for the loonie, the prospect of higher inflation in the eurozone raises the chances of a recession. 

Eurozone manufacturing PMI data will also be in focus today and is expected to confirm the preliminary reading of 47.1 in March, down from 47.8. 

Where next for EUR/CAD? 

After running into resistance at 1.4940 a 1 year high. EUR/CAD has been trending lower. The price is testing a multi-month rising trendline and the RSI is neutral.  

A break below the trendline at 1.46, which is also the level which offered resistance in January, would be key, exposing the 50 sma at 1.4545.  The break below here opens the door to 1.4490, the March 15 low. 

On the flip side, should buyers successfully defend the rising trendline support, bulls could look to rise above 1.48, last week’s high, before brining 1.4945 back into focus. 

 

 

FTSE rises boosted by oil majors 

• Oil majors track oil prices higher 
• UK manufacturing PMI to confirm 48 
• FTSE rises above 50 sma towards 7700 

The FTSE is rising, outperforming its European peers thanks to the heavily weighted oil majors. The likes of BP and Shell are pushing higher as they track oil prices northwards falling the surprise OPEC+ oil production cut. 

However, the oil output cut is weighing on other areas of the index, given that it could mean that inflation will cool at a slower pace. 

While UK inflation remains in double digits, the BoE expects it to fall to 2.9% by the end of the year. Higher oil prices could make that target less likely. Ci 

Looking ahead, UK manufacturing PMI data will be in focus and is expected to confirm that the sector contracted at a faster pace in March, with the PMI dropping to 48 from 49.3 in February. 

Where next for the FTSE? 

The FTSE 100 rebounded from the 7200 March low, rising above the 200 sma and the 50 sma, which, combined with the RSI pushing above 50 keeps buyers hopeful of further gains. 

Buyers will look for a rise above 7700 round number and late January low to expose the 50 sma at 7763. 

On the flip side, failure to close above the 50 sma could see the price test support at 7630, the November high, before exposing the 200 sma at 7445. A break below here negates the near-term up-trend.