EUR/CAD looks set for a potential upside breakout in the next few days.
Let’s take a closer look at the pair’s Reverse Head and Shoulders pattern in the 4-hour time frame:
EUR/CAD 4-hour Forex Chart by TradingView
In case you missed it, easing concerns over France’s government and better-than-expected German factory orders report helped boost the demand for the euro on Thursday.
The Canadian dollar, on the other hand, is having trouble attracting sustained demand thanks to the decline of crude oil prices, dovish Bank of Canada (BOC) expectations, and uncertainty ahead of Canada’s labor market data release.
Remember that directional biases and volatility conditions in market price are typically driven by fundamentals. If you haven’t yet done your homework on the euro and Canadian dollar, then it’s time to check out the economic calendar and stay updated on daily fundamental news!
EUR/CAD, which found support from the 1.4500 in late November, is hitting a ceiling around the 1.4850 area.
As you can see, the resistance zone lines up with a major support area from November. This month, the area of interest is near the 4-hour chart’s 200 SMA and the R1 (1.4910) Pivot Point line.
Will the euro extend its gains against the Loonie?
We’re on the lookout for more bullish candlesticks, which could set EUR/CAD up for an upside breakout of a Reverse Head and Shoulders pattern. Consistent trading above 1.4900 could lead to a retest of the 1.5000 psychological handle and previous highs near the R2 (1.5018) Pivot Point.
But what if 1.4900 holds as resistance again?
Bearish candlesticks and a clear rejection from the inflection point may draw in enough selling pressure to drag EUR/CAD to the Pivot Point (1.4750) zone if not the 1.4550 November lows.
As always, watch out for other top-tier catalysts that could impact overall market sentiment, and make sure you practice proper position sizing when taking any trades!