EURCAD Fundamental & Tech Play

by Ashraf Laidi
Nov 9, 2010 7:41 | 41 Comments

EURCAD Fundamental & Tech Play - Jpneurcadnov2010 (Chart 1)

EURCAD shows an important combination of fundamentals & technicals both pointing to further further downside. I already raised the euro’s sovereign challenges last week, pointing out the 25-30% increase in Irish/Greek/Spanish 10 year bond spreads over Germany during the same 6 weeks when EURUSD pushed higher. Such a rare occurrence happened mainly on anticipation of Fed QE2. But the euro could no longer sustain those highs solely on the back of the Fed asset purchases, while ignoring the resulting widening in corporate spreads. Ireland’s ambitious new budget is based on €6 bln in fiscal retrenchment for 2011. Whether Ireland will post sufficient GDP growth to reduce the debt ratio remains the key question for Ireland and other austerity-bound Eurozone nations. The Irish Budget has not yet been passed and is likely to face opposition before being formally voted on later in December. ASIDE FROM THESE aforementioned risks for the euro, the Canadian dollar has had another strong week. Canada’s October unemployment rate dropped to 7.9% from 8.0%, matching the June lows, which were the lowest since Jan 2009. Payrolls rose 3K after a decline of 6.6K in September. CAD gains are especially highlighted by the fact that upside surprises occurred in both Canada and the US (its biggest trading partner). Recall that in late October, CAD also outperformed against top10-traded currencies after August GDP rose 0.3% following -0.1% in July. ***************** EURCAD breaks below the 55-week MA for the first time this year (blue dotted line) after having failed to recover above 1.44, which represents the 2- year trendline resistance and the 38% retracement of the decline from the same high (1.75). *********EURCAD is now vulnerable to a retest of 1.38, followed by 1.3570s, which is the trendline support from the June low. A break below this potentially suggests 1.3120. The significance of the 1.44 retracement suggests a placement for short stops.

 

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Comments (Showing latest 10 of 41) View All Comments
DaveO
N.Cornwall, UK
Posts: 5733
9 years ago
Jan 13, 2011 11:13
I have 1.2440 for a reaction at least and then 1.2130 next likely beer stop.
Ashraf Laidi
London, UK
Posts: 0
9 years ago
Jan 13, 2011 0:18
Im inclined to call 1.23 if we break below 1.2770.

Ashraf
nakedshort
Cairns, Australia
Posts: 1
9 years ago
Jan 13, 2011 0:09
some big moves straight down then retraced over 1.29
your book is great well done
Gecko
Wellington, New Zealand
Posts: 1
9 years ago
Jan 9, 2011 22:49
Do you see more downside for this pair in 2011?
heresh
duhok, Iraq
Posts: 5
9 years ago
Jan 9, 2011 11:02
said
mulhouse, France
Posts: 2822
9 years ago
Dec 2, 2010 11:28
p87

catnip
Frankfurt, Germany
Posted Anonymously
9 years ago
Dec 2, 2010 8:07
If the most of EZone ( by population not by production capacity and GDP) gets under IMF austerity control we will inevitably see EUR USD touching 1.5 and German French stock market exploding up.
B
Florida, United States
Posts: 9
9 years ago
Dec 2, 2010 2:39
Nick92...any minute the evil banks will buy billions worth of the Euro to squeeze all the shorts. They'll buy it back up towards 1.50 and do the whole thing over again. Just wait it out. You'll see.
Nick92
paris, France
Posts: 2
9 years ago
Nov 29, 2010 16:55
What will the banks do when they will have knocked down the euro and prompted the destruction of the euro zone? We are heading towards an unknown zone where the profit opportunities will be tantamount to zero because of the collapse of the monetary system in the UE followed by chaos in Asia which is heavily dependent on Europe for its exports. It looks like the system has finally decided to accelerate its own demise.
Wally Bee
St Michael, Barbados
Posts: 2
9 years ago
Nov 24, 2010 23:21
Congratulations Ashraf : You hit the EUR/CAD bulls eye like a great marksman !!
Keep shooting straight like that !
Wally Bee