Bullish Breakout Opens Space for Further Upside Expansion

Forex

Economic

Summary:

The MACD shows a bullish histogram that is beginning to gain depth, while the signal lines are completing a bullish crossover out of neutral territory, adding weight to the thesis that the bullish breakout could hold.

BUY EURCAD

EXP

TRADING

1.60896

Entry Price

1.62650

1.59800

1.60888 -0.00152 -0.09%

0.0

Pips

Flat

1.59800

Exit Price

1.60896

Entry Price

1.62650

Import price data in Germany continue to point to a gradual moderation of inflationary pressures. Following the sharp rebound driven by rising energy costs, which pushed year-over-year growth above 6%, recent figures suggest that upward momentum may be starting to lose strength.

On the other hand, sentiment indicators showed a moderate improvement in the Eurozone's largest economy. Germany's IFO business climate index advanced to 86.6 points in July from 85.7 in June, reflecting a somewhat more favorable corporate perception regarding economic perspectives.

Nevertheless, energy risks remain a primary focus of concern for the region. European natural gas prices recorded another gain following escalating tensions in the Middle East, while the European energy market becomes increasingly sensitive with winter approaching.

The situation is aggravated by weak liquefied natural gas (LNG) imports. Flows into the European Union point to a year-over-year decline of over 25% during July, complicating efforts to replenish strategic reserves. Currently, storage levels sit around 56%, significantly below the ten-year seasonal average of nearly 72%. Furthermore, high temperatures recorded across much of the continent are boosting energy consumption and further hindering inventory accumulation ahead of the winter season.

Against this backdrop, the European Central Bank (ECB) held its policy rate unchanged at 2.25% during its July 23 meeting. However, the message delivered by the institution was distinctly hawkish. President Christine Lagarde noted that some Governing Council members even raised the possibility of an immediate rate hike, warning that an extended period of high energy costs could gradually spill over into the broader economy through second-round inflationary effects. As a result, markets currently price in a probability near 70% for a 25-basis-point rate hike in September.

In Canada, the trade outlook showed somewhat more constructive signs. U.S. officials adopted a more conciliatory tone regarding recent tariff measures, with U.S. Trade Representative Jamieson Greer suggesting that Washington's latest actions should not compromise long-term bilateral trade relations. Additionally, he left the door open for progress toward a broader agreement before the end of the year, helping reduce some market uncertainty.

At the same time, Canadian June inflation moderated more than expected. Key core measures came in below the Bank of Canada's (BoC) 2% target, reinforcing expectations that the central bank will maintain a wait-and-see stance for an extended period. This scenario has led investors to scale back bets on future rate hikes, limiting monetary support for the Canadian dollar in the short term. Bullish Breakout Opens Space for Further Upside Expansion_1

Bullish Breakout Opens Space for Further Upside Expansion_1

Technical Analysis

EURCAD reacted upward after repeatedly testing the local support level at 1.6023, and recently broke above resistance at 1.6089 during this push—a level it failed to clear on two previous recent attempts. Should price consolidate above this level, we could see a fresh impulse toward the 1.6268 area. This resistance area is notable because it aligns with the 100-period moving average currently sitting at 1.6136, while the 200-period moving average lies at 1.6158. A solid close above these levels could accelerate upward momentum.

Looking at the oscillators, the RSI sits at the 59 level, positioning itself clearly in bullish territory with room remaining before reaching overbought conditions. On the other hand, the MACD shows a bullish histogram that is beginning to gain depth, while the signal lines are completing a bullish crossover out of neutral territory, adding weight to the thesis that the bullish breakout could hold.

Trading Recommendations

Trading direction: Buy

Entry price: 1.6088

Target price: 1.6265

Stop loss: 1.5980

Validity: Aug 07, 2026 15:00:00

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Bullish Breakout Opens Space for Further Upside Expansion

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