EUR/CAD Price Forecast: Euro Weakness vs Canadian Dollar to Linger
EUR/CAD has fallen a whopping 700-pips so far this year. The currency pair succumbed to a massive wave of selling pressure on the back of Euro weakness and Canadian Dollar outperformance. This latest stretch of EUR/CAD downside seems to largely follow Eurozone covid woes in addition to surging crude oil prices. Diverging monetary policy guidance from the European Central Bank (ECB) and Bank of Canada (BoC) has likely weighed negatively on EUR/CAD price action as well.
EUR/CAD Price Chart: Weekly Time Frame (August 2016 to March 2021)
Source: IG
These fundamental forces have potential to continue strong-arming EUR/CAD lower during 2Q-2021. Though the Euro looks oversold against the Canadian Dollar judging by the relative strength index, technical support is sparse beyond 2018 swing lows around the 1.4760-price level. Breaching this area of support could bring to focus the 76.4% Fibonacci retracement of last year’s trading range as a possible downside target for EUR/CAD bears.
This subsequent layer of support beneath EUR/CAD around the 1.4670-price level also happens to roughly align with the 61.8% Fibonacci retracement of its February 2017 to March 2018 bullish leg. The long-term uptrend extended through the major 2017, 2019, and 2020 swing lows and reinforces this technical support zone as well. However, if selling pressure subsides and leads to a Bollinger Band squeeze, this might motivate EUR/CAD bulls to make a rebound attempt back toward the psychologically significant 1.5000-handle.
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