The EURCAD pair has been trading in a flat since early July with a lower limit of 1.3 and an upper one at 1.32. Periodic price attempts to get out of that range have not been successful, including momentum for a late August fall. Quotes managed to update a ten-year low. Anyway, there has been a rather quick return to the previously traded range.
The Bank of Canada and the ECB held their regular meetings on monetary policy, this week’s reports say. That led to a simultaneous 0.75% hike: Canada’s rates reached 3.25%, while the Eurozone witnessed a 1.25% level. Since these decisions were quite expected by market participants, there had been no major changes in the foreign market.
But the strongest historical rate hike by the ECB didn’t result in a significant increase in the euro. So, higher borrowing costs will only hasten the onset of European recession. Suppressing record inflation, in this sense, is unlikely to be effective, given its main cause - rising energy prices, being influenced by supply, not demand.
Canada's interest rate was the first among developed countries to exceed 3%. And the regulator's officials confirmed a further monetary tightening. Now the negative driver for the Canadian dollar is a fall in oil prices. In this case, EURCAD doesn’t see any prerequisites for significant growth.
As long as EURCAD has a flat trend with 1.3 - 1.32 borders, the most reliable option is to trade on a rebound from one limit and move to another. Considering the macroeconomic background, a movement to the lower limit of 1.3, and a new attempt to consolidate below it, are more likely.
The following trading options may be suggested:
1) Sell EURCAD at the current price. Take profit - 1.3. Stop loss - 1.32.
2) Sell EURCAD as the pair approaches the upper flat border at 1.32. Take profit 1 - 1.31. Take profit 2 - 1.3. Stop loss - 1.325.
Traders, at their discretion, may use a Trailing stop instead of a fixed Stop loss.
This content is for informational purposes only and is not intended to be investing advice.