The Euro has rallied nicely on Monday against the Loonie, as we may have just found institutional buying.
EURCAD
The Euro has rallied quite nicely during the trading session on Monday against the Canadian dollar, but it is worth noting that for the entire month of March, we’ve seen a lot of negativities in this pair as we have been in a clear downtrend dropping roughly 2% in just two weeks. Today it has seen a decent recovery as the pair opened near 1.5680 but ended up gaining just under 0.5% for the session.
Key levels include immediate resistance at the psychologically important 1.58 level, but a break above there could suggest the recent downtrend is over, but we would need more momentum. There is significant support established above the 1.56 level at the moment. The pair looks more or less like it is currently reverting to the mean back to the middle of its March range.
Eurozone Stability Over Canadian Trade Uncertainty
The Euro is surprisingly resilient in general as the European Central Bank has concluded its easing cycle, holding the deposit rate at 2%. Unlike other regions, Eurozone inflation has stabilized near the 2% target and GDP growth for the year is being revised upward, with RBC now forecasting as much as 1.8%. Economic sentiment in the European Union has reached a three-year high in the early part of the year.
The Canadian dollar is under pressure due to significant trade friction with the United States including 100% tariff threats on certain goods and 50% on Canadian-made aircraft. This is weighing heavily on the business investment side. The growth in Canada is supposed to be a modest 1.1% and the widening trade deficit and rising unemployment rate up to 6.8% are bearish for the Canadian dollar. The only major support that I see for the Canadian dollar at the moment is oil. If oil prices were to start dropping, the Canadian dollar would likely drop as well.
It’s currently in a bit of a buy-the-dip zone for those betting on Eurozone stability over Canadian trade uncertainty. That’s how I’m looking at this, but if we were to break down below the 1.56 level, that would be a big collapse just waiting to happen.