Pullback Toward Key Zone May Present Further Upside Opportunities

Summary:

The MACD presents a shallow bullish histogram, while the signal lines remain positioned well inside positive territory, ensuring that any move lower is viewed as a temporary retracement

Buy EURCAD

EXP

PENDING

1.61000

ENTRY

1.62200

TGT

1.60300

1.61008 -0.00393 -0.24%

Point

PENDING

1.60300

CLOSING

1.61000

ENTRY

1.62200

TGT

European Central Bank (ECB) Executive Board member Isabel Schnabel reinforced expectations for a more restrictive monetary policy stance on Wednesday. She noted that inflation is likely to remain above the 2% target for an extended period, while highlighting that the Eurozone economy is showing signs of strengthening. Schnabel described the natural gas market situation as "particularly concerning" and warned that the ECB must act preventatively to stop inflationary pressures from spreading through second-round effects.

On the economic front, indicators from Germany continued to deliver positive signals. The IFO Business Climate Index improved to 88.8 points in August, reaching its highest level in a year and topping both the July reading and market expectations. This improvement reflects a more favorable perception among businesses regarding the country's economic outlook.

Additionally, Germany's Federal Statistical Office reported that Gross Domestic Product (GDP) grew 0.3% quarter-over-quarter between April and June, beating the preliminary 0.2% estimate and matching the expansion pace seen in the first quarter. On an annual basis, growth was revised up to 1.0%, compared to the 0.9% initially estimated and well above the 0.4% recorded in the previous quarter, confirming a gradual acceleration in economic activity.

In energy markets, oil prices continued to pull back following news that Iran and Oman are holding talks to establish a temporary joint maritime corridor in the Strait of Hormuz. Technical negotiations will proceed with the goal of reaching a permanent agreement to regulate maritime administration, information sharing, naval traffic management, and security services.

Downside pressure on oil was further reinforced by increased diplomatic momentum in the Middle East. Pakistan's army chief recently visited Tehran to support active diplomatic initiatives, while Qatar reaffirmed its commitment to regional mediation efforts. These developments have helped ease concerns over potential energy supply disruptions originating from the region.

Meanwhile, trade tensions between Canada and the United States continue to escalate. The Canadian government announced retaliatory tariffs on U.S. imports valued at CAD 27.6 billion. The new tariffs, ranging from 15% to 50%, will affect roughly 700 products and take effect on September 8. This measure comes in response to Washington's decision to impose 50% tariffs on a similar volume of Canadian imports following the breakdown of bilateral trade talks.

In this context, U.S. Trade Representative Jamieson Greer maintained that Canada declined to close the deal under the terms previously agreed upon. For his part, Prime Minister Mark Carney stated that while progress was made during talks, it was insufficient to meet Canada's interests. He also criticized last-minute modifications introduced by Washington, describing them as unfair, economically damaging, and potentially harmful to the credibility of any future trade agreement between both nations. Pullback Toward Key Zone May Present Further Upside Opportunities_1

Pullback Toward Key Zone May Present Further Upside Opportunities_1

Technical Analysis

EURCAD is trading within a descending channel pattern, having recently touched the lower boundary of the channel before rejecting higher from the 1.6039 level. For now, price has consolidated above the 100-period and 200-period moving averages, which sit at 1.6112 and 1.6108, respectively. These averages align closely with local support at 1.6090; consequently, any pullback toward this zone could attract buyers, providing optimal opportunities to build long positions targeted toward the upper channel boundary near 1.6224.

Turning to the oscillators, the RSI currently sits at 63, approaching overbought territory, which suggests a pullback could materialize at any point without signaling a trend reversal. Meanwhile, the MACD presents a shallow bullish histogram, while the signal lines remain positioned well inside positive territory, ensuring that any move lower is viewed as a temporary retracement while the path of least resistance remains tilted to the upside.

Trading Recommendations

Trading direction: Buy

Entry price: 1.6100

Target price: 1.6220

Stop loss: 1.6030

Validity: Sep 07, 2026 15:00:00

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