The downward trend formed earlier this year continues. In May, the Canadian dollar was recognized as the strongest currency thanks to the economic recovery in Canada and the most hawkish policy of the Bank of Canada. In addition, there is optimism in the market, thanks to the growth in the cost of oil, as well as other raw materials, such as aluminum, which rose in early May to its highest level in 10 years and may become scarce in the near future.
The lack of macroeconomic reports in Canada and the euro area reduced the volatility for the EUR/CAD pair this week. However, the euro managed to recover slightly because the value of the euro is correlated with the rising price of gold, as well as for a number of other reasons, including the acceleration of inflationary processes in the eurozone, and decreasing oil prices in connection with the US negotiations with Iran on their nuclear deal and the lifting of sanctions and restrictions on oil exports.
Next week is expected to be even less volatile. No macroeconomic reports are expected that could affect the EUR/CAD rates. In this situation, we traditionally choose the deals on the trend. We also believe that the euro is a weaker currency compared to the Canadian dollar, although the Canadian dollar will most likely not be able to rise further thanks to increasing oil prices, which are already at their peak. Technical analysis tools also indicate the effectiveness of short deals in the medium term.
