The EUR/CAD pair fell hard during the course of August, crashing through a longer-term trend line the goes back to late summer of 2013. Breaking that trend line tells me that the Euro will continue to fall, even as oil prices to know favors whatsoever for the Canadian dollar. After all, the Canadian dollar is highly correlated to the value of oil, which has been falling apart. This tells me just how weak the Euro is at the moment, and tells me also that we should continue to see quite a bit of selling.
The 1.40 level below will be somewhat supportive, and I wouldn’t be surprised to see a little bit of a bounce from there. Nonetheless, I think it will probably go even lower than that, possibly heading to the 1.360 region.
If oil prices pick up, this could accelerate.
I believe that the oil markets doing better will more than likely only put more pressure on this market. I think that the breaking down below this trend line is significant, and I have been short of this market for a while. That being the case, I think that every time this market rallies there will be a selling opportunity attached to it, at least until we get above the 1.46 handle which of course would negate a lot of bearish pressure. However, I believe that the thing that you need to pay attention to the majority of the time is going to be the simple Europe versus North America equation. The European economy is much weaker than the North American economy, and as a result this pair is simply trying to play “catch-up” with the EUR/USD pair as although the Canadian economy isn’t as strong as the American economy, it certainly a stronger than the European economy. With that, I will continue to sell this market and build up a large position. Trend lines that run for as long as this one did tend to mean things when they get broken.
