EURCAD seems ready to go for a move higher as it formed an inverse head and shoulders pattern on its daily time frame. Price has yet to break past the neckline at the 1.5000 major psychological level before confirming the potential long-term climb. The chart pattern is approximately 500 pips tall so the resulting rally could be of the same size.
The 100 SMA is safely above the longer-term 200 SMA so the path of least resistance is to the upside. The 100 SMA also recently held as dynamic support and might continue to do so in the event of another pullback. Stochastic hasn’t quite reached oversold levels on the daily time frame yet but the oscillator is already pulling up to signal a return in bullish momentum.
Crude oil has tumbled nearly 3% at the start of the week as investors are worrying about a potential buildup in supply while refineries in Texas are shut down due to Hurricane Harvey. The tropical storm is expected to move to Louisiana later in the week and might lead to temporary closures in processing facilities there as well.
Medium-tier data from the euro zone has been weaker than expected so far this week but traders appear optimistic that the ECB is moving closer to tapering its asset purchase program sooner or later. The German GfK consumer climate index is due later today and no change from the 10.8 reading is eyed.
Also due today are the French consumer spending and preliminary GDP numbers, and upbeat results could give the euro another boost. As for the Canadian dollar, the RMPI and IPPI could prove to be short-term catalysts if they come in significantly stronger or weaker than expected.
By Kate Curtis from Trader’s Way