Market Analysis – EURCAD
The Euro against the Canadian Dollar is increasing in value this week as the asset forms its third consecutive bullish daily candlestick of the week, but has shown a slight decline over the past few hours. The asset throughout the last 3 weeks of May, and this month-to-date, has had a lack of direction and real momentum after the asset indicated oversold and lost momentum on the 7th May 2021. After the market opened this week, the Euro has shown signs of strengthening and has managed to form clear bullish price swings. However, the market is treading cautiously as the asset is still priced extremely low and has not yet broken through previous psychological prices such as the 1.4777 resistance level.
Today at 16:00 (GMT+2), a decision on the interest rate of the Bank of Canada will be published. Analysts predict that most likely the monetary policy will remain at the level of 0.25%, so the main attention of investors will be focused on the subsequent press conference. The change in the rhetoric of the Board of Governors of the Bank of Canada towards tightening monetary policy could further build momentum in the current bullish price movement. While if the Central Bank continues to support its hawkish stance, or even gives stronger indications of sooner alterations, this can halt the trend and support the Canadian Dollar in the medium term.
Today we have no major news for the Eurozone, but traders are still evaluating yesterday’s statistics released and will be positioning themselves for tomorrow’s events. Yesterday, Germany released what is known as the Zew Economic Sentiment, which is in simple terms a sentiment index based on surveyed German institutional investors and analysts. The higher the index is, the more positive it potentially will be for the Euro in the short term. The figure was released at 79.8 and 81.3 which is much lower than predicted by analysts and in addition lower than the figures released for April. The positive news, if any can be taken from the announcement, is the index remains far higher than the results seen in the first four months of the year
The main event for the Euro and the Eurozone is likely to be the Monetary Policy statement and European Central Bank conference which is scheduled to be conducted tomorrow. The meetina and statement will be of great importance as it shall review the pace of the emergency bond buying program in the short to medium term. The program was maximised in March 2020 to prevent a rise in borrowing costs hurting the recovery in the Eurozone. Over the past few months, the dovish rhetoric stance by European policymakers suggests no hurry to slow the pace of buying under the €1.85 trillion Pandemic Emergency Purchase Programme (PEPP). However, as we see unemployment figures trickling down slowly and inflation rising higher than previously predicted by the Central Regulator, economists are now wondering whether the policy will be altered sooner than originally thought. Any indications of alterations can have a strong effect on volatility and price movement.
Looking at each currency individually as well as a pair can also benefit our overall analyst and ensure we see the wider picture. The Euro Currency Index which measures the movement of the Euro against the US Dollar, Pound, Yen and Franc. Looking at the index, we can see the price is decreasing today as it had the day before, but has not necessarily only witnessed bearish trends. Price movements in favour of the Euro have also been indicated on the index. Looking also at the Canadian Dollar we can see mixed movements depending on the pair. The currency is declining against the Pound and Australian Dollar, but is increasing against the Yen, US Dollar and Franc.