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Bearish Signals Mount for EURCAD as Rising Wedge Nears Completion
Economic
Political
Summary:
The RSI recently peaked at 79 when EURCAD touched the wedge’s upper boundary, reinforcing the view that upside momentum is overstretched.
Sell
TradingEURCAD
EXP
1.62600
Entry Price
1.60500
TP
1.63300
SL
1.62320 -0.00108 -0.07%
0
Point
Flat
1.60500
TP
CLOSING
1.62600
Entry Price
1.63300
SL
Canada’s Ivey PMI tumbled sharply from a healthy 55.8 in July to 50.1 in August, hovering just above the stagnation line and signaling a significant slowdown in economic activity. This deterioration underscores mounting concerns about the resilience of Canada’s economy and raises the likelihood of a dovish shift by the Bank of Canada (BoC).
Expectations for further policy easing have grown as the Canadian labor market shows increasing signs of strain. Analysts at Bank of America (BofA) have forecasted a 25 basis point rate cut at the BoC’s upcoming policy meeting, which would bring borrowing costs down to 2.5%. The bank also projects that rates could be lowered further, reaching 2% by the end of 2026. BofA emphasized that a rising unemployment rate, combined with inflation now sitting comfortably within the BoC’s 2% target range, provides strong justification for additional monetary easing.
Adding pressure to the Canadian outlook, oil prices — the country’s largest export — remain pinned near multi-month lows. Crude has been weighed down by news of additional supply increases, though at a slower pace than in previous months, alongside growing concerns about weakening global demand.
Across the Atlantic, the European Central Bank (ECB) is widely expected to leave rates unchanged for a second consecutive meeting on Thursday, supported by steady growth and inflation levels holding close to target.
Meanwhile, French politics have taken another turbulent turn. On Monday, parliament toppled the government over plans to rein in the country’s rising debt burden. Lawmakers passed a no-confidence vote against Prime Minister François Bayrou after parties failed to agree on spending cuts. The outcome forced President Emmanuel Macron to appoint France’s fifth prime minister in less than two years, highlighting ongoing political instability in one of the eurozone’s largest economies.
Geopolitical risks also remain elevated. On Wednesday, Poland activated its own air defenses, as well as those of NATO, to intercept drones that entered its airspace during a Russian attack on Ukraine. Kyiv further alleged that Russian drones deliberately crossed into Polish territory, marking a direct violation of NATO’s airspace and raising concerns of further escalation.
Technical Analysis
EURCAD has been forming a rising wedge pattern since early July, and the pair is now approaching the critical apex of this structure. A downside breakout would confirm the bearish nature of the pattern, which often resolves lower. At present, price action is hovering near the upper boundary of the wedge, making the higher levels of the channel attractive areas to watch for potential selling opportunities if bearish reactions emerge.
The 100-period and 200-period moving averages sit at 1.6128 and 1.6061 respectively, aligned near the lower edge of the formation and offering potential layers of support.
Momentum indicators also add weight to the bearish case. The RSI recently peaked at 79 when EURCAD touched the wedge’s upper boundary, reinforcing the view that upside momentum is overstretched. Taken together, these factors strengthen the likelihood of a bearish reversal, with initial downside targets seen around 1.6030 — the next major support level. A break below the rising trendline could pave the way for a deeper correction in the sessions ahead.
Trading Recommendations
Trading direction: Sell
Entry price: 1.6260
Target price: 1.6050
Stop loss: 1.6330
Validity: Sep 19, 2025 15:00:00
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