In my last post about the EURCAD pair several days ago (July 9), I mentioned that the Loonie could be preparing for a revolt against the Canadian dollar. Back then, the pair already broke its downtrend line and appeared to be in the phase of forming the right shoulder of an inverted head and shoulders pattern. However, the pair did not fall back down to the bottom of the left shoulder. Instead, it found some support at 1.3000 before springing back up again. And just recently, the pair finally broke out from the mentioned formation. Having said that, this move could now be a reversal that could send the euro back towards 1.4500 against the Loonie. A break below the neckline again could push it back down to 1.3000.
Fundamentally, today’s worse-than-expected drop in the University of Michigan Consumer Sentiment Survey for July (66.5 versus 74.2) caused the investors to dispose the more favored currency, the Loonie, vis-a-vis the euro. Though the projected 0.25% increase (to 0.75% from 0.50%) in Canada’s interest rate this coming Tuesday (July 20) could propel the CAD higher over the euro again. Still, given the unexpected slide in June retail sales of -1.2%, hence a drop in business activity could be enough for the BOC to pause its rate hike. If this happens, then the Loonie would surely weaken as the market already expects that it would raise it. Stay tune!