EUR/USD and USD/CAD Forecast:
- EUR/USD It slides on the back of disappointing economic data from Europe
- US dollars / Canadian dollars It continues to form a bearish double top pattern
- This article looks at the key euro/American dollar and USD/bastardLevels to watch in the coming days
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EUR/USD analysis
The euro weakened against the US dollar on Tuesday, weighed down by disappointing economic data from Europe and higher US Treasury yields. In early afternoon trading, EUR/USD fell around 0.2% to 1.0690, steadily approaching a key support area near the May lows.
Worse-than-expected German factory orders, which fell 0.4% in April, and stagnant eurozone retail sales at the start of the second quarter dampened sentiment by reinforcing fears of a possible recession later in the year.
If Europe’s economic outlook deteriorates further, the ECB may hesitate to proceed with additional interest rate hikes in the coming months, preventing a narrowing of yield spreads between the US and the EU, which is a major risk for the euro. This isn’t the base scenario yet, but it’s something to keep in mind if the clouds on the horizon get darker.
In terms of technical analysis, EUR/USD corrected sharply lower from its May highs and negated a major trendline early last week, but appears to be stabilizing, with the pair moving between resistance at 1.0750 and support at 1.0640 over the past few sessions, a sign of Possibility of market consolidation.
While the outlook for EUR/USD has turned less positive of late, the bulls may still be able to regain the upper hand, but to do so, they need to push the stock decisively above the overhead resistance at 1.0750. If this scenario plays out, buyers may return the bullish bias before a possible rally towards the psychological handle of 1.0900.
On the other hand, if the negative pressure gains speed and prices breach the cluster support at 1.0640/1.0600, all bets are off. This breakdown could attract new sellers, paving the way for a decline towards 1.0500, where the 200-day SMA aligns with the 38.2% Fibonacci retracement of the September 2022/May 2023 high.
|
change in |
Longs |
Shorts |
Hey |
| Daily | 7% | -1% | 4% |
| weekly | 15% | -12% | 4% |
Technical chart of the EUR/USD pair
Technical chart of the EUR/USD pair
|
change in |
Longs |
Shorts |
Hey |
| Daily | 4% | -2% | 2% |
| weekly | 60% | -39% | 4% |
Analysis of the USD/CAD pair
Over the past two months, the USD/CAD pair has been forming what appears to be a double top, as seen in the daily chart below. The double top is a reversal pattern, consisting of two similar highs separated by a decline that often develops in the course of an extended advance.
This bearish setup is confirmed once the price completes its similar “M” formation and breaks below the technical support created by the bottom of the intermediate pattern – the neckline. In the current situation, the neckline is located just above the psychological barrier of 1.3300.
If the double top is validated, USD/CAD could take huge losses, although this scenario could take time to unfold. In any case, the magnitude of the potential downward movement can be obtained by projecting the height of the formation vertically from the breakout point. For the pair, this could mean a decline towards 1.2960.