Two Trades to Watch: EUR/USD, USD/CAD

EUR/USD stays above 1.07 ahead of German ZEW economic sentiment data

EUR/USD is edging lower but remains in a narrow range above 1.07 after four straight days of gains. The market mood is calmer amid optimism that the global banking crisis could be contained for now.

It could be a busy day for EUR/USD, with ZEW economic sentiment data expected to draw attention. German ZEW Economic sentiment is expected to fall in March to 17.1, down from 28.1 and eurozone economic sentiment is forecast to decline to 16 from 29.7.

However, the markets could be forgiven, given the speed with which the central banks and authorities addressed the banking crisis.

ECB President Christine Lagarde is also due to speak.

Meanwhile, the USD is pushing higher as attention turns from the play monetary policy meeting. It is expected to hike rates by 25 basis points in order to address inflation which is still three times the central bank’s target, but it also remains aware of the cracks appearing in the banking system owing to the steep hike in rates.

Where next for EUR/USD?

EUR/USD rebounded from 1.0516 March low but has once again run into resistance at the 50 sma at 1.0727. The RSI is above 50, keeping buyers hopeful of further upside.

Buyers will look for a rise over 1.0727 to extend gains to 1.0744, the February 15 high, before bringing 1.08 round number and 1.0923, the January high into focus.

Sellers need a break below 1.0655 to negate the near-term uptrend and to expose the 100 sma 1.0585. A fall below 1.0516 creates a lower low.

USD/CAD rises ahead of Canada inflation data

USD/CAD is rising after two days of losses, and the USA dollar finds support ahead of the FOMC rate decision tomorrow.

Meanwhile, the loonie is struggling as oil prices continue to fool and as investors look ahead to Canadian inflation data.

Canadian CPI is expected to cool to 5.4% from 5.9%. Meanwhile, core inflation is forecast to ease to 4.8% from 5%. Cooling inflation would support the BoC’s decision to pause its rate hikes in the March meeting in order to assess the impact of rate hikes on the economy. Hotter than forecast inflation could raise questions about the central bank’s ability to keep hikes on pause.

Meanwhile, oil prices hover around a 15-month low on worries that the banking crisis could spark a recession, which would hurt the oil demand outlook.

API oil inventory data is due later today.

Where next for USD/CAD?

After running into resistance at 1.3860 US/CAD has been trending lower, before finding support again at 1.3650.

Buyers will be encouraged by the 50 sma crossing above the 100 sma and the RSI above 50. This combined with the holding of support at 1.3650 could see buyers rise above resistance at 1.37 ahead of 1.3860 the 2023 high. A move above here creates a higher high.

Meanwhile, the bearish crossover on the MACD could encourage sellers, who need to break below 1.3650 in order the extend the selloff towards 1.3560, the March low. A move below here exposes the 50 & 100 sma at 1.35.

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