Despite the data out just a few moments ago that Canadian manufacturing sales rebounded by a good 1.0% (vs. 0.4% expected), the medium-term lower highs and the lack of a clear short-term trend, we think this FX pair is looking bullish for these reasons:
- There has been around 6 bearish-looking daily candles in as many days, yet we haven’t seen any downside follow-through. This is telling us that the bearish momentum is weakening and that a short squeeze rally could be on the cards.
- Support around 1.5050 (old resistance) has been defended on daily closing basis for several days.
- Price above 21-day exponential moving average
- It may have already formed a higher low in the last week of February around 1.4880, relative to its previous low at 1.4760 hit in October of last year.
- Price has been making longer-term higher lows and higher highs since bottoming out in August 2012.
So, we are anticipating a bullish breakout in the EUR/CAD for the above technical reasons. However if the 1.5050 support gives way then, in that case, we will reconsider our short term bullish view.