The EURCAD was flat on Wednesday as the Bank of Canada (BoC) goes first with a double interest rate release. Tomorrow will see the European Central Bank (ECB) also update the market on its monetary policy.
The BoC is expected to hold interest rates steady at 0.25% despite the background of economic gloom. Canada saw a 20% crash in its GDP in the second quarter and although falling, unemployment is still at 9%. The only thing that will keep the bank from moving lower would be the recent increase in inflation to 1%. The country still has a high interest rate compared to other developed nations but the fear of inflation may lead to them sitting this meeting out.
Tomorrow will see the ECB release their own rate guidance and monetary plans. The bank is also expected to hold steady at a 0% rate, with a deposit rate of -0.5%. The problem for the bank is that Europe is now stuck in a Japanese-style era of weak growth, low rates, and deflation. This was maybe the only outcome for the amount of bond-buying that the ECB embarked on under previous President Mario Draghi.
Current President Christine Lagarde and other members have been critical of a stronger Euro and may want to take action against it. Expectations of a strong third-quarter GDP will also be dampened by the current surge in virus cases in the Eurozone. Canada saw 2,200 cases yesterday but this pales into comparison with Europe, where France and Spain alone saw 33k and 18k respectively.
EURCAD Technical Outlook
Yesterday’s bearish close in EURCAD has left the pair trading under the 50-day moving average and the support comes in at 1.5500. A break below can target stronger support at 1.5400, which was a low around the 20th July. A stop on shorts can go above the 1.5600 level. A close there would see further gains. The Investing Cube team is currently available to help all levels of traders with the Forex Trading Course or one-to-one coaching.
EURCAD Daily Chart
