EUR/CAD tops 1.6000, nears the highest levels since 2009 on Trump's tariffs
- The EUR/CAD extended its gains and trades above the round number of 1.6000.
- The weakness of the Canadian Dollar is the main driver of the pair.
- A break above 1.6105 will send the pair to the highest levels since 2009, at the height of the financial crisis.
The EUR/CAD cross is trading above 1.6000, up nearly 1% on the day. The high so far was 1.6018, which is the most elevated level since January 2016, when oil prices tumbled and the USD/CAD was trading around 1.47. Back then, the pair peaked at 1.6105. A move above this level will send the EUR/CAD to trading levels last seen in June 2009, nearly nine years ago.
This time, the Canadian Dollar is not so weak against the US Dollar (just under 1.3000) but the euro is much stronger against the greenback, with EUR/USD trading around $1.2330. The Canadian Dollar is the main driver of the most recent move though.
The loonie has been under selling pressure amid the tariffs that US President Donald Trump announced on steel and aluminum. Canada is a primary exporter of steel to the US. Moreover, the President conditioned an exemption for Canada from the steel tariff f it reaches a new deal on the North American Trade Agreement (NAFTA). Negotiations are currently held in Mexico City. Progress is being made but there are significant hurdles to overcome.
The mood in Wall Street has improved, but this has not helped the Canadian Dollar, a risk currency, to recover.
In the euro-zone, Germany will have a new government in around one week. The center-left SPD approved joining a new Grand Coalition with Chancellor Angela Merkel. On the other hand, the Italian elections yielded no outright majority for any party or bloc, leaving a hung parliament. After the initial drop, the euro recovered.
The Bank of Canada will make its rate decision on Wednesday. Governor Stephen Poloz and his team are expected to leave the interest rate unchanged at 1.50%. The European Central Bank convenes on Thursday and they are also unlikely to announce any policy changes.
Both currencies will continue moving on political news as well as central bank decisions.
EUR/CAD Technical Analysis
The cross is facing resistance at the 1.6105 level mentioned beforehand. The monthly chart shows further resistance at 1.6445, a high point in June 2009. Further above, 1.6800 was a high point in April that year.
Looking down, recent lines provide guidance. Support may be found at 1.5700, a round level and also a stepping stone on the way up. Further below, 1.5512, was a retracement point.
