EUR/CAD Forex Signal: ECB Rate Decision Setup

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EUR/CAD Forex Signal: ECB Rate Decision Setup

EUR/CAD Forex Signal: ECB Rate Decision Setup

EUR/CAD might be in for a retest of the broken neckline and support at the 1.5000 major psychological level, with the ECB easing in today’s rate statement and giving a forex signal for a short bias. Stochastic is already pointing down, which means that bears are in control at the moment.

The 38.2% Fibonacci retracement level already appears to be holding as resistance but the extra volatility in today’s economic event might still lead to at test of the falling trend line or a forex signal to short early, depending on how dovish the ECB is.

Shorting at the 1.5000 mark with a stop above the 61.8% Fibonacci retracement level and a target of new lows around the 1.4400 area could lead to a good return on risk for this trade.

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Forex Signal and Forecast

In today’s rate statement, ECB Governor Draghi and his men announced an interest rate cut from 0.25% to 0.15% and negative deposit rates. This led to massive euro selling, as traders weighed in on the lower returns for the shared currency.

This easing move has been priced in way ahead but traders still piled on their short trades since the move was more aggressive than anticipated. Inflation in the euro zone and in the region’s largest economy was weaker than expected, with CPI forecasts being downgraded or posting lower than estimated results.

PMI figures from the largest euro zone economies also showed signs of weakness, as the figures either showed a contraction or a slower pace of expansion in the previous month. This could weigh further on growth and possibly push the euro zone back in recession again, adding to more forex signal to short the euro against is stronger forex counterparts.

Negative deposit rates have been leading to currency depreciation in the past, particularly for Sweden, although the long-term trend did show a bit of a recovery afterwards.

To contact the reporter of the story: Samuel Rae at samuel@forexminute.com