EUR/CAD: ECB Hikes Rates Amid High Inflation Outlook

4 mai 2023

Today, the ECB increased rates by a further 25bp, in response to the high inflation outlook which is expected to persist for an extended period of time. This rate hike was in line with most expectations and the smallest increase in the current tightening cycle. The ECB's tone has become more cautious, as the statement suggests that the past rate increases are strongly affecting the financing and monetary conditions in the euro area, but it is still uncertain how this will translate to the real economy. The first part of the statement shows that the ECB's previous decisions have had an impact, while the latter part does not specify the extent to which further tightening is required.

Although the EUR/CAD made a Double TOP, it is still in a bullish trend on the H4 and Daily timeframes. Therefore, our idea is to look for an opportunity to buy EUR around the 61.8% Fibonacci level, which is in line with a support area and the presence of a dynamic trendline that can act as dynamic support. If the price goes below 1.4600, it would indicate a clear change in the trend.