Canadian Dollar: Returning From A Long Trip
Axiory | Apr 22, 2021 06:57AM ET
April didn’t start out too well for the Canadian dollar, but it'll probably end up great for it.
That’s thanks to the Bank of Canada, which decided to cut the stimulus yesterday and hinted about rising interest rates in the very near future. Rates are what really drive the sentiment on the market, so we didn’t have to wait long to see significant movements on pairs with the Canadian Dollar.
What’s amazing is that those movements didn’t happen in random places. Before the statement from the BOC, CAD was technically on a very slippery slope, particularly in pairs with USD and EUR.
USD/CAD. Here, the price was in a long-term downtrend, but yesterday, the price was breaking both important down trendlines! In theory that was very bullish for this pair, therefore negative for the Canadian dollar, that is, until the BOC stepped in.
The Canadian dollar strengthened immediately and the price reversed creating a bearish engulfing pattern. What’s more is we saw a false bullish breakout, which almost always is a great opportunity to trade in the opposite direction. Now we’re back below downtrend lines, ready for another drop.
A similar situation can be spotted on the EUR/CAD. Here, we also have a bearish engulfing on a daily candlestick chart (green area). We also have a false breakout, which, in this case, is above the horizontal resistance on the 1.507 (yellow).
In addition, we have a bounce from the mid-term down trendline (green) and also from the 38,2% Fibonacci. Well, based on my understanding of price action, all that is pretty bearish. Sentiment is negative, as long as we stay below the green down trendline.
In the case of USD/CAD, everything seems pretty clear, same for the EUR/CAD, but only from the technical point of view, because today we have ECB! We all know what can happen if ECB surprises the market; none of the technical analyses work and traders go bananas.
Will that be the case on the euro today? Well, we are not expecting anything major, so maybe…
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.