EUR/CAD Slides as Oil Rally Strengthens Canadian Dollar

Traders' Opinions

Summary:

EUR/CAD weakened for a third straight session as stronger oil prices boosted the Canadian Dollar, while escalating US-Iran tensions and expectations for another ECB rate hike remained in focus.

SELL EURCAD

EXP

TRADING

1.60650

Entry Price

1.57600

1.62500

1.60678 -0.00394 -0.24%

0.0

Pips

Flat

1.57600

Exit Price

1.60650

Entry Price

1.62500

EUR/CAD extended its decline for a third consecutive session on Tuesday as rising oil prices lifted the commodity-linked Canadian Dollar, outweighing expectations that the European Central Bank could tighten monetary policy again later this year.

The Canadian Dollar drew fresh support after crude prices advanced on escalating geopolitical tensions in the Middle East. The latest developments saw US Central Command carry out new strikes against Iranian military targets, while Iran's Islamic Revolutionary Guard Corps claimed responsibility for disabling two supertankers in the Strait of Hormuz, accusing them of ignoring maritime warnings. Tehran warned that continued cooperation with Washington could prolong the closure of the strategic shipping route and deepen the global energy crisis.

The rebound in oil prices strengthened the Loonie, given Canada's status as a major crude exporter, leaving EUR/CAD trading around the 1.6070 area during the European session.

The Canadian Dollar remains closely tied to developments in the energy market. As long as supply concerns continue to support crude prices, the Loonie is likely to remain resilient even as investors monitor broader geopolitical risks.

On the European side, traders continue to assess whether the ECB will deliver another 25-basis-point interest rate hike at its September meeting. Policymakers maintained a data-dependent stance after June's decision, while analysts at MUFG still expect one additional rate increase this year. However, for now, the support from higher oil prices is proving to be the dominant driver, keeping EUR/CAD under pressure despite expectations for further ECB tightening.

Technical Analysis

EUR/CAD has suffered a notable technical setback on the 4-hour chart, with the pair slipping to around 1.6060 after breaking beneath both the rising trendline and the 1.6100–1.6120 support band. That breakdown interrupts the upward sequence that had guided price action since March and raises the risk that the latest weakness is developing into a broader corrective phase.

The loss of 1.6100 is especially important because this area had repeatedly attracted buyers throughout May and June. Price is now trading below that former floor, which may turn into resistance on any short-term rebound. A recovery toward 1.6100–1.6130 could therefore be met by fresh selling unless bulls quickly reclaim the broken trendline.

The next downside checkpoint sits near 1.6000, a psychological level and a natural area for temporary consolidation. If sellers push through that handle, the decline could extend toward 1.5900, followed by the projected target around 1.5750–1.5760. Reaching that region would represent a much deeper unwinding of the advance seen during the second quarter.

For buyers to regain influence, EUR/CAD would need to move back above 1.6130 and hold there. A stronger recovery beyond 1.6200 would reduce the immediate bearish threat, while a return above the major 1.6250–1.6270 supply zone would be required to restore the previous bullish outlook.

The current configuration favors sellers because the pair is no longer merely testing support; it has moved below both horizontal demand and the ascending structure that previously contained pullbacks. Unless that breakdown is reversed quickly, further downside remains the more probable scenario.

TRADE RECOMMENDATION

SELL EUR/CAD

ENTRY PRICE: 1.6065

STOP LOSS: 1.6250

TAKE PROFIT : 1.5760

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