Extreme Selling Pressure Could Set the Stage for an EURCAD Rebound

Forex

Economic

Summary:

This level coincides with the 0.50 Fibonacci retracement of the recent downward movement and also marks an area where a previous bearish gap remains.

BUY EURCAD

EXP

PENDING

1.56150

Entry Price

1.58750

1.55000

1.56410 +0.00117 +0.07%

Pips

PENDING

1.55000

Exit Price

1.56150

Entry Price

1.58750

In Europe, the European Central Bank (ECB) will announce its monetary policy decision on Thursday. Policymakers are expected to keep the deposit rate unchanged at 2.50%, following a cumulative 50-basis-point increase in interest rates this year. Market participants will assess the central bank's guidance for clues about its next policy moves and how it intends to respond to the current economic and inflation outlook.

Germany's IFO Business Climate Index improved to 90.2 in October, up from 89.9 in September and above market expectations of 89.8. However, the IFO Current Assessment Index declined to 88.8 from its previous reading of 89.5. In contrast, the Expectations Index, which provides an indication of how businesses assess the outlook for the next six months, increased to 91.6 from 90.4 in the previous report. The mixed figures suggest that while business expectations have improved, assessments of current economic conditions remain under pressure.

Meanwhile, credit rating agency Moody's maintained France's sovereign credit rating at Aa3 despite the country's rising debt burden and ongoing social unrest, which triggered mass protests across several major cities over the weekend. The decision was welcomed by financial markets, where investors had anticipated a possible downgrade. French 10-year government bond yields fell below the 5% level before giving back part of their gains during Monday's European trading session.

In Canada, headline inflation edged higher, but the September report came in slightly below expectations, with prices increasing by 0.1% month over month and 3.1% year over year. Both readings were one-tenth of a percentage point below forecasts, while underlying inflation measures remained moderate. These figures suggest that price pressures have not accelerated significantly, although the recent increase in energy-related risks remains a concern for policymakers.

Comments made by Bank of Canada Governor Tiff Macklem over the weekend reflected his concerns about the accumulation of energy-related inflation risks. These remarks have led markets to price in a higher probability of an interest rate hike at next week's monetary policy meeting. Macklem had previously suggested that the Bank's October forecast update could play a decisive role in determining whether a more restrictive monetary policy stance was warranted. Extreme Selling Pressure Could Set the Stage for an EURCAD Rebound_1

Extreme Selling Pressure Could Set the Stage for an EURCAD Rebound_1

Technical Analysis

EURCAD briefly reached the local low of 1.5614, a level that was also tested on March 8. On that occasion, the pair staged a strong bullish recovery, making the current price action an important area to monitor for a potential rebound. If a similar recovery develops this time, bullish opportunities could emerge, with an initial target around 1.5875. This level coincides with the 0.50 Fibonacci retracement of the recent downward movement and also marks an area where a previous bearish gap remains. A recovery toward this zone could therefore help close the gap. Meanwhile, the 100-period and 200-period moving averages are positioned at 1.6063 and 1.6053, respectively, providing higher resistance levels should the rebound extend further.

Regarding the oscillators, the Relative Strength Index (RSI) has fallen to 19, placing it firmly in oversold territory. Readings this low have not been seen since March, when the pair rebounded strongly after reaching similar levels. This raises the possibility that buyers could begin to regain control in the short term, although confirmation from price action would still be necessary. Meanwhile, the MACD displays a bearish histogram that has only recently begun to lose depth, suggesting that downside momentum may be starting to weaken. However, the signal lines remain firmly in bearish territory, indicating that the broader momentum has yet to turn positive. Any upward movement should therefore be considered a potential corrective rebound within the prevailing bearish trend rather than a confirmed trend reversal.

Trading Recommendations

Trading direction: Buy

Entry price: 1.5615

Target price: 1.5875

Stop loss: 1.5500

Validity: Nov 06, 2026 15:00:00

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Extreme Selling Pressure Could Set the Stage for an EURCAD Rebound

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