Recent euro strength — as the continent’s political concerns have waned — and softer oil prices weighing on commodity currencies such as the Canadian dollar have helped push the EUR/CAD exchange rate higher of late.
RBC Capital Markets, in its Trade of the Week note, reckons the euro’s run has further to go as fiscal and monetary factors offer the loonie, as the Canadian unit is known, little support.
“This week’s Federal Budget in Canada is not likely to make any largescale changes to the deficit projection from the Fall Economic Statement, while CPI data on Friday should show underlying inflationary pressures remain muted,” says the bank.
For the euro, RBC reckons the bloc’s composite purchasing managers’ survey released on Friday should hold at its multiyear highs.
Furthermore: “In the eurozone we have hawkish speakers (Weidmann Monday, Lautenschläger Wed & Thu) who could broach the idea of a hike before the end of quantitative easing, following comments from Nowotny last week.”
EUR/CAD resistance can be seen around the 1.44 level and the cross has struggled to break decisively above its 200-day moving average, around 1.4350 at mid-session yesterday.
RBC said it established a long EUR/CAD position at 1.4362 and has set a target of 1.4665 for what is a trade designed to last just several days. A stop loss has been placed at 1.4230.