EUR/CAD has traded closely to the 200-day SMA for the entire month of March. This is a significant pause from the recent broad strength the loonie has experienced since the January 20th Bank of Canada rate decision. At that policy meeting, the BoC kept rates steady and Governor Poloz highlighted that likelihood of new fiscal stimulus was an important consideration in the bank’s decision to keep policy steady. The focus on Tuesday will come when Trudeau’s government releases their first budget. Economists will want to learn which election promises will be kept. The key areas will encompass the budget, specifically spending plans, and the announcement of new programs or tax policies. A well-received could help the BoC's shift more towards the tightening camp.
The EUR/CAD 15-minute chart shows that price is tentatively forming a bearish Gartley pattern. Point D is targeted just ahead of the 161.8% Fibonacci expansion level of the X to A leg and the 78.6% Fibonacci retracement level of the B to C move. If bearish reversal pattern is respected we could see price target the 1.4600 area. If the bearish pattern is invalidated, further bullish momentum could target the 1.4750 region.
The longer-term trend of Canadian dollar strength may tentatively see some weakness leading up to the budget announcement and after the noise settles, we could see further loonie strength as long as we do not see a major retreat with oil prices.
The trade: Sell EUR/CAD at 1.4735, with a stop loss at 1.4775, and a take profit at 1.4615. The Risk/Reward Ratio is 1:3.