By: DailyForex.com

The EUR/CAD pair is one that I have been following closely for some time now. We have broken down a bit, and we even broke below the bottom of the previous days hammer on Tuesday. This of course is a very negative sign, but as you can see I have the horizontal line drawn on the 1.44 handle, an area that I think needs to be overcome by the sellers in order for us to continue lower. Quite frankly, I think this pair right now has a lot more to do with the Euro, and almost nothing to do with the Canadian dollar itself. After all, the Euro continues to sell off against other currencies, and this is simply going to be a sympathy move.

However, you have to keep in mind that the large, round, psychologically significant number of 1.44 has offered support in the past, and as a result I need to see is break down below there. Once we do, I will not hesitate to sell this market as I believe we should then head to the 1.40 level based upon the longer-term charts. I think that any bounce from here would more than likely simply offer a nice selling opportunity, perhaps as high as the 1.47 level.

Don’t fight the trend.

I believe that you simply cannot fight a trend that’s this strong, and obviously the Euro is in significant trouble. While the Canadian dollar hasn’t exactly shined either, there are no concerns about loosening the monetary policy coming out of the Bank of Canada. On the other hand, it’s obvious that the European Central Bank is going to have to loosen monetary policy to fight potential deflation in the European Union. We are even seeing potential signs of deflation out of Germany of all places, and that certainly must have the Europeans concerned. All things being equal, I think this will be one of those “dark horses” as far as trades go, as most people will not pay attention to it but creates a clear and definitive trend.

EURCAD 82714

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