All eyes are on the ECB today where President Draghi is expected to announce a massive stimulus plan in its next round of quantitative easing. A cut in Deposit Facility Rate to -0.50% is expected together with more bond buying. The latest Eurozone industrial production figures disappointed and showed a steeper contraction than expected. Inflation remains absent which may give the ECB reasons to worry down the road. With a dovish ECB priced in, can bulls power ahead in the EURCAD following the press conference? Subscribe to the PaxForex Daily Fundamental Analysis and earn more pips per trade.
The Canadian Dollar has enjoyed a bullish tailwind as OPEC is trying to reduce oil supply in order to increase prices. The strength in the EURCAD was additionally driven by weakness in the Euro. As bearishness in the Euro appears to have peaked, is a short-covering rally brewing in this currency pair? Canadian economic data is expected to show further weakness in its housing, how will this impact consumer confidence? In a slowing global economy which pressure commodity prices lower, the Canadian Dollar may struggle to maintain its bullish stance. Is now a good time to short the EURCAD? Today’s fundamental analysis will take a look at the upside potential of this currency pair and evaluate the downside risk.
Here are the key factors to keep in mind today for Euro trades:
- Final German CPI: The Final German CPI for August decreased by 0.2% monthly and increased by 1.4% annualized. Economists predicted a decrease of 0.2% and an increase of 1.4%. Forex traders can compare this to the German CPI for July which increased by 0.5% monthly and by 1.7% annualized. The Final EU Harmonized German CPI for August decreased by 0.1% monthly and increased by 1.0% annualized. Economists predicted a decrease of 0.1% and an increase of 1.0%. Forex traders can compare this to the EU Harmonized German CPI for July which increased by 0.4% monthly and by 1.1% annualized.
- Final French CPI: The Final French CPI for August increased by 0.5% monthly and by 1.0% annualized. Economists predicted an increase of 0.5% and of 1.1%. Forex traders can compare this to the French CPI for July which decreased by 0.2% monthly and which increased by 1.1% annualized. The Final EU Harmonized French CPI for August increased by 0.5% monthly and by 1.3% annualized. Economists predicted an increase of 0.5% and of 1.2%. Forex traders can compare this to the EU Harmonized French CPI for July which decreased by 0.2% monthly and which increased by 1.3% annualized.
- Italian Quarterly Unemployment Rate: The Italian Quarterly Unemployment Rate for the second-quarter was reported at 9.9%. Forex traders can compare this to the Italian Quarterly Unemployment Rate for the first-quarter which was reported at 10.3%.
- Eurozone Industrial Production: Eurozone Industrial Production for July decreased by 0.4% monthly and by 2.0% annualized. Economists predicted an increase of 0.1% monthly and a decrease of 1.3% annualized. Forex traders can compare this to Eurozone Industrial Production for June which decreased by 1.4% monthly and by 2.4% annualized.
- ECB Rate Decision: The ECB is predicted to keep its Interest Rate at 0.00% and its Marginal Lending Facility Rate at 0.25%; this would equal no change in the ECB rate policy from the previous meeting. The ECB is predicted to cut its Deposit Facility Rate to -0.50%; this would equal a cut of 10 basis points as compared to the previous meeting’s Deposit Facility Rate of -0.50%.
Here is the key factor to keep in mind today for Canadian Dollar trades:
- Canadian New Housing Price Index: The Canadian New Housing Price Index for August is predicted flat at 0.0% monthly and to decrease by 0.2% annualized. Forex traders can compare this to the Canadian New Housing Price Index for July which decreased by 0.1% monthly and by 0.2% annualized.
Should price action for the EURCAD remain inside the or breakout above the 1.4500 to 1.4600 zone the following trade set-up is recommended:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 1.4550
- Take Profit Zone: 1.4855 – 1.4920
- Stop Loss Level: 1.4455
Should price action for the EURCAD breakdown below 1.4500 the following trade set-up is recommended:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 1.4455
- Take Profit Zone: 1.4175 – 1.4265
- Stop Loss Level: 1.4500
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