Home Forex Market Analysis EUR/CAD: Strong Rally for the Euro As Pair Breaks From Correction

EUR/CAD: Strong Rally for the Euro As Pair Breaks From Correction

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EUR/CAD: Strong Rally for the Euro As Pair Breaks From Correction
  • The EU expects to reduce its unemployment rate from 8.3% into Q2 2021.
  • Canada is 296,000 short of attaining the pre-Covid increase in employment figures, with the rates at 8.2%.
  • The EU aims to increase exports into Canada as CETA takes center stage in Q2 2021.

The EUR/CAD trading pair opened +0.43% on April 19, 2020, from the previous day. The pair has been on a 12-day bull run after the positive investor confidence index from Sentix at a rate of +13.1%. The euro’s dominance outruns Canada’s Housing starts for March 2021 that rose 21.63% to 335,200 from a previous record of 275,600. The euro was also unaffected by a -2.12% decline in the construction output for February 2021 month-on-month from +0.84%. Major countries such as Spain have ruled out the increase of tax to focus on stimulating the economy and creating employment. 

Unemployment rates

The Euro area kept its unemployment rates at 8.3% as of February 2021, with its 27 states having a rate of 7.5% at the time. While contributing 16% of the international output (same as the US), only 2.6 million EU workers lost their employment ventures as opposed to 9.6 million in the US. The rate had, however, increased from 6.9% to 7.1% from 2019 through to 2020 after the pandemic struck. 

Positive labor news from Canada indicated that about 303,300 jobs were added to the economy in March 2021 jobs following the ease of restrictions around the country. Strong gains were witnessed in healthcare, the construction industry, and education as the service sector hit recovery mode.  

EU unemployment rates

EU unemployment rates

Canada is now 296,000 short of attaining the pre-Covid employment figures, with the rates at 8.2%. As of February 2021, approximately 15.953 million people in the 27 member states of the  EU were unemployed as opposed to a gain of 34,000 in the EU and 48,000 in the euro area.

Trade

Political tensions between the US and Russia have also added impetus to the euro amid the stoppage of the Johnson and Johnson vaccines roll out. State aid controllers from the EU have also eased restrictions allowing the less developed countries within the bloc to gain green/digital growth. Apart from higher aid caps, governments will be allowed to provide incentives to spur investments. The guidelines tipped to take effect from January 1, 2022, will cover up to 48% of the EU population from a previous record of 47%. 

The EU has also received a boost from the trade agreement with Canada (CETA). Countries like Ireland have witnessed a 58% rise in exports since the ratification of the agreement in 2017. According to media reports, the export of popular Irish beef to Canada has grown 700%, while cheese exports have increased by more than 400%. 

Bilateral trade between the EU and Canada

Bilateral trade between the EU and Canada

Germany was the largest importer/exporter of Canadian goods. Canada was ranked the 10th largest market for EU goods exports at 1.7% and 16th in importing EU goods at 1.2%. Trade goods value between the EU and Canada in 2018 stood at €723 billion. EU exports to Canada were highest in 2019 at €38.3 billion against imports at €17.4 billion. The trade balance took a hit in 2020 when it declined 23.56% from €17.4 billion in 2019 to €13.3 billion. Under CETA, the EU will continue to benefit from reduced tariffs and increased exports post-Covid.   

Technical Analysis

EUR/CAD trading chart

EUR/CAD trading chart

The EUR/CAD forms the Elliott Wave Pattern from February 18, 2021, in a 60-day run-through to April 22, 2021. We expect the bull run to continue as the pair seeks resistance at 1.5131. The arc pattern also runs concurrently with the Elliot wave, further confirming that the pair may move to break resistance. As the bulls struggle for recovery, the pair is likely to gain after the strong Q1 2021 correction. 

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