Charts show that the euro strengthened against the Canadian dollar on Thursday, with the pair climbing above 1.6460 for the first time since spring 2009, when the world was still reeling from the global financial crisis.
The current weakness of the Canadian dollar is being influenced by several factors:
→ Trade relations with the United States – according to media reports, some Canadian industries such as steel and automotive manufacturing are facing competitive disadvantages under the current agreement.
→ Oil prices have fallen to a five-month low, partly due to expectations surrounding a potential meeting between the US and Russian presidents. As we noted on 13 October, the XTI/USD exchange rate could drift towards $55 per barrel.
Meanwhile, the euro has benefited from the softening of the US dollar. Notably, the DXY index has turned lower from a key resistance level — the upper boundary of the channel identified in our 9 October analysis.
However, an examination of the EUR/CAD chart suggests that the current upward momentum may be losing steam.
Technical Analysis of the EUR/CAD Chart
Price movements — with key turning points shown in bold — outline a rising channel that has remained relevant since August.
The bearish case rests on the following factors:
→ The pair has reached the upper boundary of the channel, which has repeatedly acted as strong resistance and may do so again.
→ The sharp mid-October rally pushed the RSI indicator into extreme overbought territory.
On the other hand, price action continues to reflect strong demand, as seen in the clean breakout above the previous peak near 1.6400, which occurred on a wide bullish candle with minimal pullback.
In these conditions, it is reasonable to assume that:
→ After a 1.6% rise in seven days, some long holders may start taking profits, leading to consolidation near the upper boundary of the channel;
→ If a correction from the upper channel line develops, it is likely to be shallow, as bullish activity could re-emerge around the median line, reinforced by the former resistance at 1.6400.
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