Short EUR/CAD: Top Trade Opportunities

Short EUR/CAD on Elevated Oil Prices and Stark Monetary Policy Divergence

The first quarter of 2022 ended with the US greenback, Australian greenback and Canadian greenback as standout performers whereas the Turkish Lira, Russian Ruble, Japanese Yen and the Euro have been among the many worst performers (in opposition to the greenback). I favor the commodity currencies in opposition to the basically weaker currencies with comparatively dovish financial frameworks.

Positive Outlook for the Canadian Dollar in Q2

The outlook for CAD is constructive as Canada is within the early levels of a relatively aggressive fee mountaineering cycle with markets anticipating 200 foundation factors of mountaineering earlier than 12 months finish (as of 25 March 2022). I consider a good quantity of the hawkish bets have been priced in, that means future hikes might not essentially drive CAD, however ought to assist the foreign money on the very least.

The predominant driver behind CAD for Q2would be the value of oil – which appears to be like nicely supported at elevated ranges from a basic standpoint. In Q2, whereas we might even see some easing concerning normal provide bottlenecks, oil costs are prone to stay elevated. OPEC+ seems decided to stay to the extra 400,000 bpd month-to-month output goal as it’s but to deviate from the settlement in earlier conferences. Actual output has fallen in need of the goal in latest months as some OPEC members have didn’t ramp up output as a result of storage constraints or a scarcity of funding, additional exacerbating provide challenges.

Dovish European Central Bank Policy Unlikely to Shift in Q2

Despite the date for doable ‘lift-off’ within the Eurozone shifting ever nearer, the ECB stands dedicated that rate of interest hikes shall be thought of someday after the Bank’s internet purchases below the Asset Purchase Programme (APP) runs its course, which is anticipated in Q3. The ECB additionally cautioned that it reserves the best to change the dimensions and period of the online asset purchases in accordance with future information and financial outlook. Such optionality comes throughout as dovish in comparison with extra hawkish central banks, just like the Bank of Canada, which talked about on the March assembly that it anticipates charges must rise additional.

Short EUR/CAD Trade:

Continued Euro weak point and continued CAD energy stay central to this commerce with a lofty goal. It could also be advisable to cut back the commerce dimension at some stage in this commerce.

EUR/CAD Weekly Chart

Short EUR/CAD: Top Trade Opportunities

Chart ready by Richard Snow, Tradingview

A pullback from present ranges in the direction of 1.3890 stays a fascinating entry degree within the context of latest, robust, one-sided bearish momentum. Thereafter, the zone of assist with a midpoint of 1.3750 seems as the primary actual check to the commerce. The goal of the brief commerce is available in at 1.3340 – which is formidable – so it might be prudent to contemplate 1.3500 if indicators of bearish fatigue begin to seem. The commerce shall be thought of invalidated above 1.4100.

The month-to-month chart helps to outline the goal of 1.3340 which has acted primarily as assist through the years.

EUR/CAD Monthly Chart

Short EUR/CAD: Top Trade Opportunities

Chart ready by Richard Snow, Tradingview

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