InvestMate|EUR/CAD Time to fall. Long-term in-depth analysis.
💶EUR/CAD Time to fall. Long-term in-depth analysis.
💶The Euro situation does not look very interesting.
💶The market consensus is that economic growth in the euro area will slow down.
💶The situation is saved by the low unemployment rate of 6.6%.
I would add that this is the lowest unemployment rate ever recorded.
💶Unfortunately, the situation in the labour market is not helped by rising inflation, the next year-on-year reading of which is due on 31 October, and which could return to 10% or even beat it.
💶The euro is still a cheap currency. This is compounded by relatively low interest rates compared with the USA, Canada, Australia and the UK, where they are sometimes many times higher.
💶The interest rate in the EU is only 1.25%. On 27 October we will find out what the next decision will be, with the market expecting a sharp increase of 75 basis points to 2%.
💶The war in Ukraine and the tense global situation have thrown in their two cents, resulting in the EU having its lowest trade balance in history at €-50.9B this month. Europe is definitely importing more than it is exporting, which is not healthy for the economy.
💶The PMI for industry has also only been falling and falling since January. It has fallen from 58 points to 48.10 currently.
tradingeconomics.com/euro-area/manufacturing-pmi
💶Finally, I would also like to draw attention to consumer sentiment, which stands at -27.6. These are once again the lowest levels in the history of the European Union. We will find out how they are for October on 28 October.
💶As we can see, the situation in the European Union does not look colourful, much of this data has already been discounted, but I believe that the market has not discounted the economic impact that such a persistent situation could have on the future of the European Union.
Moving across the ocean to Canada.
🍁There, too, economic growth is forecast to be slightly lower than previous readings but we do not see as much divergence as with the euro. tradingeconomics.com/canada/gdp-growth
🍁Unemployment remaining low at 5.2%.
🍁Inflation slowly slowing The latest reading on 19 October indicated 6.9% which, compared to the peak of 8.1% recorded in June, offers a breath of optimism.
🍁Interest rates definitely higher than in the EU. At 3.25%. With the next rate hike due on 10 October, the market assumes it will be a 75 basis point hike to 4%.
🍁Trade balance at a high of C1.52B in August. On 3 November we will find out how much it amounted to in September. Canada is now seeing very strong trade volumes. The highest in a decade.
🍁Manufacturing PMI low of 49.80 points.
tradingeconomics.com/canada/manufacturing-pmi
🍁The Consumer Confidence Index is falling but neither all-time highs nor a "crisis" state is just low at 48.51 points.
tradingeconomics.com/canada/consumer-confidence
🍁As we can see, Canada's economic situation looks decidedly better than that of the euro area.
🍁Will we see this reflected in the chart of these currencies?
🗠Looking at the chart we see that EUR/CAD has been in a downtrend for almost 2 years now. The trend definitely took a turn for the worse after the outbreak of war in Ukraine.
🗠Since 22 August, an upward correction of 5.53% began on the downtrend.
🗠But over the last month we do not see the strength for a further upward breakout. On 18 October we made a double top formation and immediately recorded a decline. Is this a sufficient signal for a decline?
🗠Looking at the euro compared to other currencies where it is definitely stronger and the rebound was definitely more blunt. Only on the dollar did we not see such a big increase because the dollar has also been on the rise for the last few weeks.
🗠Coming back to EUR/CAD, we are currently at the resistance levels set in April and July this year, these are the 1.34-1.35 levels. We can see that the price is struggling to break through them.
🗠As for taking positions. This seems to be a good time to take positions, either to wait for a retest of the 1.34 levels after the declines and attempt to rebound from below.
🗠Or setting a stop above the recent highs above the 1.36 level, with a target somewhere at the new lows. I am a fan of not setting targets but observing the situation as it unfolds, but in this case the level of 1.25 seems to be the most reasonable in case the falls continue.
🗠I don't want to bore you with indicators, but looking at any of them we can clearly see a downward divergence.
🗠Also the direction is known. Trend is set, stop and target known, I invite you to follow this pair. I am very curious to see what the coming week will bring.
🚀If you appreciate my work and effort put into this post I encourage you to leave a like and give a follow on my profile.🚀
💶The Euro situation does not look very interesting.
💶The market consensus is that economic growth in the euro area will slow down.
💶The situation is saved by the low unemployment rate of 6.6%.
I would add that this is the lowest unemployment rate ever recorded.
💶Unfortunately, the situation in the labour market is not helped by rising inflation, the next year-on-year reading of which is due on 31 October, and which could return to 10% or even beat it.
💶The euro is still a cheap currency. This is compounded by relatively low interest rates compared with the USA, Canada, Australia and the UK, where they are sometimes many times higher.
💶The interest rate in the EU is only 1.25%. On 27 October we will find out what the next decision will be, with the market expecting a sharp increase of 75 basis points to 2%.
💶The war in Ukraine and the tense global situation have thrown in their two cents, resulting in the EU having its lowest trade balance in history at €-50.9B this month. Europe is definitely importing more than it is exporting, which is not healthy for the economy.
💶The PMI for industry has also only been falling and falling since January. It has fallen from 58 points to 48.10 currently.
tradingeconomics.com/euro-area/manufacturing-pmi
💶Finally, I would also like to draw attention to consumer sentiment, which stands at -27.6. These are once again the lowest levels in the history of the European Union. We will find out how they are for October on 28 October.
💶As we can see, the situation in the European Union does not look colourful, much of this data has already been discounted, but I believe that the market has not discounted the economic impact that such a persistent situation could have on the future of the European Union.
Moving across the ocean to Canada.
🍁There, too, economic growth is forecast to be slightly lower than previous readings but we do not see as much divergence as with the euro. tradingeconomics.com/canada/gdp-growth
🍁Unemployment remaining low at 5.2%.
🍁Inflation slowly slowing The latest reading on 19 October indicated 6.9% which, compared to the peak of 8.1% recorded in June, offers a breath of optimism.
🍁Interest rates definitely higher than in the EU. At 3.25%. With the next rate hike due on 10 October, the market assumes it will be a 75 basis point hike to 4%.
🍁Trade balance at a high of C1.52B in August. On 3 November we will find out how much it amounted to in September. Canada is now seeing very strong trade volumes. The highest in a decade.
🍁Manufacturing PMI low of 49.80 points.
tradingeconomics.com/canada/manufacturing-pmi
🍁The Consumer Confidence Index is falling but neither all-time highs nor a "crisis" state is just low at 48.51 points.
tradingeconomics.com/canada/consumer-confidence
🍁As we can see, Canada's economic situation looks decidedly better than that of the euro area.
🍁Will we see this reflected in the chart of these currencies?
🗠Looking at the chart we see that EUR/CAD has been in a downtrend for almost 2 years now. The trend definitely took a turn for the worse after the outbreak of war in Ukraine.
🗠Since 22 August, an upward correction of 5.53% began on the downtrend.
🗠But over the last month we do not see the strength for a further upward breakout. On 18 October we made a double top formation and immediately recorded a decline. Is this a sufficient signal for a decline?
🗠Looking at the euro compared to other currencies where it is definitely stronger and the rebound was definitely more blunt. Only on the dollar did we not see such a big increase because the dollar has also been on the rise for the last few weeks.
🗠Coming back to EUR/CAD, we are currently at the resistance levels set in April and July this year, these are the 1.34-1.35 levels. We can see that the price is struggling to break through them.
🗠As for taking positions. This seems to be a good time to take positions, either to wait for a retest of the 1.34 levels after the declines and attempt to rebound from below.
🗠Or setting a stop above the recent highs above the 1.36 level, with a target somewhere at the new lows. I am a fan of not setting targets but observing the situation as it unfolds, but in this case the level of 1.25 seems to be the most reasonable in case the falls continue.
🗠I don't want to bore you with indicators, but looking at any of them we can clearly see a downward divergence.
🗠Also the direction is known. Trend is set, stop and target known, I invite you to follow this pair. I am very curious to see what the coming week will bring.
🚀If you appreciate my work and effort put into this post I encourage you to leave a like and give a follow on my profile.🚀
🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌
💲 To keep up to date with all my activities I invite you to visit my Telegram 💲
💲 t.me/Investmatez 💲
🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌
💲 To keep up to date with all my activities I invite you to visit my Telegram 💲
💲 t.me/Investmatez 💲
🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌🌌
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.