EUR-CAD Consolidation Could End Soon

By: Mike Kulej In spite of bad news regarding sovereign debt of some of the member states of the European Union, the common currency has been getting stronger. Most analysts attribute it to the recent increase of the interest rates by the European Central Bank, or more precisely, the expectation of additional hikes. This rally in the rally has not been effected all of its crosses. The EUR-CAD, for example has hardly moved at all over the past two weeks, and settled into a consolidation. The price tested the trendline, even dipped under it, but so far remained above, preserving the uptrend.

What Can We Learn From This?

It is clear that the EUR-CAD “waits” for a catalyst to push it either way. The price is in a holding pattern, with technical indicators confirming it. We can see that the Bollinger bands have contracted sharply, which typically happens before a larger move starts. That is what we should expect here soon, but in which direction?

Breaking either the nearest support or resistance will likely decide the next market move. However, since the trendline is intact, continuation of the uptrend is a little more likely. The ADX should also turn up for additional confirmation. It is possible for the EUR-CAD to start moving again as early as Tuesday, after the Bank of Canada policy meeting. 
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