- The euro has rallied quite nicely during the trading session on Monday against the Canadian dollar, as we continue to see a lot of support just below near the 1.4750 level.
- Keep in mind that both of these central banks are expected to cut rates rather soon, and therefore the interest rate expectation game may be a little skewed.
- After all, Europe's cutting, but it looks like they're coming out of a recession, so that should be very good for economic growth. Canada, on the other hand, has to deal with a sluggish economy and the fact that oil seemingly can't get out of its own way, so you don't have the usual crude oil aspect of driving the Canadian dollar higher.
- If crude oil continues to fall, it's very likely that the Canadian dollar will suffer as a result.
On the upside
If the market were to break above the 1.49 level, I don't see much stopping it from reaching the 1.50 level rather quickly. Underneath that 1.4750 level, we have the 50 day EMA that comes into the picture as well. I think that could offer dynamic support. Furthermore, it's an area that with a little bit of imagination, you could suggest that it is the top of some type of ascending triangle although I'm the first to admit that it is a little bit sloppy looking.
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Regardless, EUR/CAD is a market that I think continues to see a lot of upward momentum, so I don't have any interest in trying to get too cute and short it right now. I think short-term dips continue to offer buying opportunities at least until something drastically changes.
Ultimately, I do think that the European Union might be a place where a lot of money is flowing into stocks, as it looks like the DAX and the CAC both are supporting the idea of Europe growing into the 2nd half of the year. Alternatively, the bank of Canada will be cutting for other reasons, most of which will be around the idea of spurring growth.
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