EURCAD has formed higher lows and higher highs to trade inside an ascending channel pattern visible on its 4-hour chart. Price is about to test the resistance and might be due for another slide back to the bottom.
However, the 100 SMA is above the longer-term 200 SMA to signal that the path of least resistance is to the upside. In other words, resistance is more likely to hold than to break. In that case, EURCAD might be in for a steeper rally.
RSI is already indicating overbought conditions, though, and turning lower could signal a return in selling pressure. Similarly stochastic is in the overbought region to signal that buyers are exhausted and may let sellers take over.
The Loonie has been in selloff mode mostly due to the less hawkish BOC statement as central bankers acknowledged that the Canadian economy has slower momentum going into Q4. The statement also highlighted risks from falling crude oil and trade tensions, which have dampened business activity.
With that, traders are pricing in much lower odds of a BOC hike anytime soon. Further declines in crude oil could keep weighing the Loonie down, but it’s helpful to note that the OPEC and Russia seem ready to make an output deal soon.
According to Oman’s oil minister, most member nations are on board, including Libya and Nigeria. Russia will also reportedly join in the production agreement but Iran is lobbying for an exemption on account of sanctions. Even so, a coordinated effort to curb production could ease oversupply fears even as the US continues to pump more oil.
As for the euro, Italy’s debt remains a concern, along with Brexit developments. PM May is having trouble getting her deal through parliament and the loss of the legal advice vote might be a preview of how the “meaningful vote” on December 11 might turn out.