Bullish Opportunities Hidden at Local Support Zone on Potential Retest

Central Bank

Economic

Summary:

If the price consolidates near the local support zone once more and we observe a bullish crossover in the signal lines, it would present an ideal setup for long positions.

BUY EURCAD

EXP

PENDING

1.60150

Entry Price

1.61600

1.59600

1.60815 +0.00250 +0.16%

Pips

PENDING

1.59600

Exit Price

1.60150

Entry Price

1.61600

The Bank of Canada (BoC) left its benchmark interest rate unchanged at 2.25% last week, matching market expectations. During the post-decision press conference, Governor Tiff Macklem adopted a relatively hawkish tone, reflecting the institution's confidence in the Canadian economy's growth and inflation outlook.

Macklem noted that economic activity appears to have regained momentum and highlighted that bank projections point to growth of 1.8% in both 2027 and 2028. Likewise, he indicated that long-term inflation expectations remain well-anchored, though he warned that the primary risks stem from Middle East tensions and the evolving trade relationship with the United States. In this regard, he reiterated that monetary policy decisions will continue to be made on a meeting-by-meeting basis and stressed that the BoC will not allow rising oil prices to translate into persistently high inflation.

Looking ahead to coming months, the entity expects inflation to continue moderating gradually, provided energy prices pull back from current levels. Additionally, it highlighted that the second quarter is displaying solid economic performance, though assessing the sustainability of this recovery will be necessary.

In Europe, producer prices in Germany continued to reflect moderate inflationary pressures. The Producer Price Index (PPI) advanced 1.8% year-on-year in June, marking three consecutive months of growth, albeit slowing from the 2.2% recorded in May. On a monthly basis, the indicator fell by 0.3%, exceeding the contraction expected by the market.

For their part, Eurozone data showed mixed signals. The current account registered a surplus of EUR 25.1 billion in May, beating both the previous reading and market forecasts. At the same time, annual inflation moderated to 2.8% in June from 3.2% in May, reinforcing the perception that price pressures continue to diminish gradually.

However, the rebound in energy prices remains a significant source of uncertainty. Oil has accumulated a gain close to 20% in July as a result of escalating tensions between the United States and Iran. The deterioration of the temporary peace agreement, the resumption of the U.S. blockade on Iranian ports, and attacks on vessels near the Strait of Hormuz have increased risks to the global crude supply.

In this context, investor attention will focus on the European Central Bank (ECB) monetary policy meeting scheduled for Thursday. Although the institution is widely expected to keep interest rates unchanged following the 25-basis-point increase implemented in June, markets will carefully analyze the official statement and remarks from President Christine Lagarde for signals regarding the future path of monetary policy, especially given the balance between moderating inflation and higher energy costs. Bullish Opportunities Hidden at Local Support Zone on Potential Retest_1

Bullish Opportunities Hidden at Local Support Zone on Potential Retest_1

Technical Analysis

EURCAD quickly reclaimed the support located at 1.6015 after briefly breaking below it at the start of the week. It recovered and closed above this level with distinctly bullish price action, which could trigger a recovery phase targeting the 1.6163 level—an area hosting the 0.618 Fibonacci retracement. Furthermore, this zone is accompanied by the 100 and 200-period moving averages, sitting very close to one another at 1.6157 and 1.6162, respectively, indicating that this signal cluster could attract price upward.

Looking at the oscillators, the RSI currently sits at the 49 level, essentially in neutral territory. Meanwhile, the MACD shows a bullish histogram that is beginning to build depth, although the signal lines remain embedded deep in negative territory. Consequently, if the price consolidates near the local support zone once more and we observe a bullish crossover in the signal lines, it would present an ideal setup for long positions. Conversely, if the price breaks below the support area, it could open the door for further declines, invalidating the bullish setup.

Trading Recommendations

Trading direction: Buy

Entry price: 1.6015

Target price: 1.6160

Stop loss: 1.5960

Validity: Jul 31, 2026 15:00:00

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Bullish Opportunities Hidden at Local Support Zone on Potential Retest

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