ANALYSIS ON EURCAD
For the last couple of months, EUR has maintained a prominent position in the currency weakness log. The uncertainties and high energy costs arising from the Russian invasion of Ukraine have contributed significantly to the loss in weight of the euro as a currency. As we expect the ECB rate hike in the coming days, we also believe that the euro strength may remain unaffected due to the rising rate of inflation.
Conversely, the Canadian dollar has remained relatively strong over the months. The Canadian dollar has benefitted immensely from the high cost of crude, and as the BoC raises its rate to 3.25%, the currency is most likely to appreciate.
From the weekly timeframe, EURCAD is primarily on a downtrend, supported by the strength and weakness of CAD and EUR. We also see a classic divergence in the Money Flow Index (MFI). The Money Flow Index (MFI) is a technical indicator that measures how money flows into and out of a security over a specified period. The MFI is an indicator that combines momentum and volume with an RSI formula. With a classic divergence, the MFI indicates a reduced volume as price trends downwards. Fig. 1.1.
On a daily timeframe, We use the Sentiment Zone Oscillator to determine price position. From the chart, we see the Oscillator hover around the lower band. Accordingly, the price of any asset appreciates when the oscillator reaches the lower band and depreciates when it trades to the upper band. Fig.1.2.
To determine entry, we drop lower to the 4H timeframe. Generally, we observed that Euro (EUR) paired with the Canadian dollar (CAD) is trading at a psychological level of 1.3100. We expect the pair to initiate a new trajectory either to a lower level as the EUR weakens further or a new high if the Canadian dollar weakens despite the rate hike.