There are 3 monetary policy announcements next week and only 2 are expected to be big market movers — the European Central Bank and Bank of Canada rate decisions. EUR/CAD will be in play and a strong trend could emerge if these central banks surprise.
For the past few weeks, investors have been positioning for balance sheet changes by the ECB and hawkish sentiment from the BoC but on Friday, there was talk the ECB may delay making changes until December and if that proves to be true, it would be exceptionally negative for the euro. If the Bank of Canada surprises with another rate hike after this past week’s strong GDP numbers, the Canadian dollar will soar and these cross dynamics could send EUR/CAD down to 1.45.
Technically, EUR/CAD ended the week with two very strong days of selling and this move has taken the pair to 2-month lows. The break below 1.4725, a previous support level opens the door to a move down to 1.46 and possibly even 1.45. EUR/CAD would need to rise back above 1.4850 to negate the downtrend in the pair.
