The EUR/CAD pair broke down during the session on Thursday, clearing the bottom of the shooting star that had formed on Wednesday. What I noticed above the 1.3750 level offered resistance yet again, something that it has done several times now or the course of the last several weeks. As you follow the line to the left, you can also see that it once offered significant support in the month of January, so I think this has become a fairly important level in this currency pair.
The fact that we close towards the very bottom of the range of course suggests that this pair is going to continue to go much lower. That would make sense considering that the EUR/USD pair also sold off during the session, and as a result it appears that the move is probably related more to the Euro than anything else.
Europe versus North America
I would say that there are a lot of things it can be pushing this market right now, but without a doubt the easiest thing is to simply think of it as “Europe versus North America.” After all, even though the Canadian dollar is getting a bit soft at this point in time, and of course the oil markets are struggling, the fact is that the European Union is much worse off than Canada. Canada has the benefit of exporting to the United States, which currently right now is one of the stronger currencies and economies around the world. With that, I believe that this pair continues to drive much lower, probably heading to the 1.3350 handle given enough time.
That of course was the most recent low, and it makes sense that we would try that area again to see if the support holds. If we can break down below there, I think that we had to the 1.30 level next, simply because it’s the next large, round, psychologically significant number and makes more sense. That being said, I continue to be very bearish of this pair.
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