Today we are reviewing a very interesting EUR/CAD currency pair, the rates of which in July tested the minimum level for 10 years. The euro was able to gain momentum versus the main currencies, suggesting that consolidation has now finished. In the end, one would expect either a flat trend period or a reversal. The first scenario seems the most likely, but the option of continuing the downward trend, with achievement of new historical lows, is even more likely, since the war continues in Europe and no one knows when it ends. We can safely say that the EU and Russia's conflict will continue at this time, with perspective of rising oil and gas prices, which makes the EU economy more vulnerable than ever, while Canada, despite the global recession, will be able to get support due to expensive and deficit commodities.
The focus of investors' attention is inflation in the EU. The new report should be published early in the morning. Also, GDP in Germany, the EU's largest economy, will not be ignored. Meanwhile, the business confidence index in the Eurozone fell from 7 to 3.5 pips in July, and inflation in Germany was 7.5%, which is slightly higher than forecasts.
We still favor the Canadian dollar when compared to these two risky investments. Firstly, it is difficult to compete with the Bank of Canada in their aggressive monetary policy, secondly, because of the prospects for rising oil and gas prices, which is positive for Canada, but a terrible phenomenon for the EU, and of course anti-Russian sanctions, from which the EU loses the most. Most technical analysis indicators also show a Sell signal. Therefore, today the choice seems obvious to us: today we sell Euros and buy CAD.
