We’ve just gone long EURCAD in our AP Fund on Etoro at 1.2748. We like this position from both a fundamental and technical perspective.
Fundamentally, we view this as the trade that will perform well on the basis of sentiment and concern around the conflict in Ukraine dissipating in coming weeks. The lack of progress from the Russians, along with more positive signs of negotiation, could see markets reduce anxiety fears in coming days. This would be positive for EUR, a currency that is flagging up as oversold vs some G10 crosses.
Being short CAD also allows us to express the view that we think oil prices have peaked. The lack of follow through in the move beyond $100 makes us think that a new top has already been formed. Although we don’t see oil materially moving lower, the appreciation of CAD does make it ripe for a pullback as investors reassess oil forecasts.
From a technical point of view, EURCAD is touching 30 on the RSI, an oversold point in our view. We also note the crossover on the MACD on a daily timeframe, which could point to a move up.
For specific levels, 1.3980 was the peak from late March which will be the first test on the high side. A break below 1.3600 would cause us to reconsider our view.