Market Forecast- EURCAD paints downside possibilities amid rallying oil prices

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Market Forecast- EURCAD paints downside possibilities amid rallying oil prices

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EURCAD might turn downside next week as oil prices shoot higher. Meanwhile, the EUR may stay neutral or even retreat after making multiple highs in recent weeks.

The strength of the oil market could trigger a sharp decline on EURCAD as fundamental and technical factors support the bears more. The currency pair has gained over 350 pips in November so far, as EUR rose to new highs. However, the recent oil market bullish outlook supports a change of direction in the coming week. This suggests that the currency pair might resume the larger bearish trend which lasted for three months from August to October. What are likely market sentiments that could push for a bearish EURCAD?

CAD to rise on bullish oil market?

CAD has a direct correlation with the oil market. In November, oil prices gained over 29% as Covid19 vaccines brightened investors’ mood. The second wave of the virus has much smaller effect on the demand for oil products than the first wave. There were only partial restrictions in some countries in the Euro-zone and some states in the US. In the first week of December, Oil prices have gone over 2% up due to OPEC+ optimisms. Oil producers are so optimistic that they decided to add to productions from January with eyes on 2mln BPD output by April.

As the chart above shows, WTI broke above the $43-44 resistance zone. The black gold, with the current risk sentiment, will most likely hit $51 critical price level.

A neutral or weaker Euro?

Euro looks overbought at the moment. Further rallies could be capped followed by at least a minor bearish correction in the coming days or weeks. The dollar index might bounce at 90.5 or 90 which also suggests EUR is close to a peak. A neutral, bearish or at least a much less strong EUR together with a bullish CAD should trigger a bearish EURCAD.

EURCAD Technical Analysis

On the long term, as the chart above shows, the price is rejecting a resistance zone.The rally from 1.5310 is corrective and the bearish trend from 1.5983 to 1.5310 should continue toward 1.52 and 1.52. A bearish pin-bar candle pattern at this resistance zone (confluence of the channel top and the 1.5670-1.5658 resistance zone) also signals reversal to the downside.

Thursday dip was a strong statement to the bulls to watch out. However, today’s move so far has been corrective – currently at the 50% Fibonacci retracement level. 1.5670-1.5658 is a very good zone to watch for bearish traction. Once the price breaks below the channel, EURCAD has a very big chance of going much deeper.

Disclaimer: This communication is for informational purposes only and should not be viewed as any form of recommendation as to a particular course of action or as investment advice. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. This communication has been prepared based upon information, including market prices, data, and other information, believed to be reliable; however, TigerWit does not warrant its completeness or accuracy. Trading CFDs involve risk and can result in loss of capital.

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