After two years of sluggish gains, the EURCAD currency pair is showing signs of life in 2024. This month’s rally has erased January’s losses, leaving many wondering if the Euro is finally ready to soar against the Canadian Dollar.
Several factors are fuelling this potential shift. On the Eurozone front, positive economic data is boosting confidence. Industrial production soared 2.6% in December, exceeding expectations, while employment grew 1.3% year-on-year. This paints a picture of a resilient economy, potentially attracting traders to the Euro.
Meanwhile, Canada’s inflation woes seem to be easing. January’s inflation rate dipped to 2.9%, marking a decline from the previous month and below expectations. This raises the possibility of a dovish pivot by the Bank of Canada, potentially weakening the Loonie relative to the Euro. The upcoming Eurozone inflation data on Thursday could be a decisive factor in influencing the trajectory of the EURCAD pair.
Technical
The EURCAD currency pair has demonstrated a bullish trajectory, charging upwards this month. A decisive breakout above the 100-day moving average, a key technical indicator, fuelled the rally, validating the optimistic sentiment surrounding the Euro. This surge kicked off from a support level at 1.44900, marking the launchpad for the current uptrend.
However, upside momentum waned as indicated by overbought readings on the RSI. This triggered a pullback from the 1.46473 resistance level, a point where sellers emerged. Currently, the pair finds itself trading at the 23.60% Fibonacci Retracement level. A high-volume breakdown below this level could signal a loss of confidence in the uptrend, potentially leading to further declines towards the 50% Fibonacci level, another key intermediate support zone. In contrast, if economic data re-energizes the bullish momentum, a retest of the 1.46473 resistance level could be on the cards.
Summary
The EURCAD pair has been driven by a strengthening Euro this month. Strong Eurozone data and cooling Canadian inflation have fuelled optimism. Technically, the pair faces a test at the 23.60% Fibonacci level. Economic data on Thursday will likely be key in influencing the short-term trajectory of the pair.
Sources: Eurostat, Statistics Canada, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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