EUR/CAD Prime for a Drop to 1.46

EUR/CAD Prime for a Drop to 1.46

EUR/CAD Prime for a Drop to 1.46

EUR/CAD was the second worst performing currency today behind EUR/NZD and we believe that further losses are likely. The euro was hit hard by weaker economic data. In Germany retail sales dropped 0.4% against expectations for a 0.2% rise. German unemployment rolls increased 2k and consumer prices in the Eurozone dropped 0.1%. This was the first time that euro area inflation turned negative since March 2015 and despite Bundesbank President Weidmann’s recent comment that deflation has become less of a concern, the drop in inflation at a time when commodity prices are very low raises the risk of low inflation sticking which could revive the talk of additional ECB easing which would add pressure on the currency. CAD on the other hand traded higher for the first time in 9 days on the back of stronger GDP growth. Canada’s economy expanded by 0.3% in the month of July against expectations for a 0.2% rise. On an annualized basis, GDP growth in Canada accelerated to 0.8% from 0.5%. At the same time CAD has become deeply oversold and is due for a stronger recovery.

Technically EUR/CAD trading in a broad channel and it failed at the top of the channel on Tuesday. The bottom of the channel is below 1.48 and we believe that the currency pair will test that point. It could even move lower if Eurozone data continues to weaken and oil prices bottom out. We would not be surprised to see EUR/CAD trading at 1.46.

Chart Of The Day

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