Euro recovers as Monte dei Paschi gets $5 bn funding

The rise in the price of crude oil to about $53.80 per barrel assisted the Canadian dollar to rise against the Euro dollar, which was under selling pressure due to the Fed rate hike.

The report of poor financial health of the world’s oldest and Italy’s second-biggest bank, Monte dei Paschi di Siena, also aided the decline of the EUR/CAD to 1.3880.

However, the currency pair recovered last week to about 1.4140 levels. We have a bullish view on the currency pair due to the reasons mentioned below.

To ensure that Monte dei Paschi di Siena stays afloat, on Friday, the Italian government officially approved funding to the tune of 5 billion Euro dollars ($5.2 billion). It can be remembered that the bank had warned the possibility of going insolvent in four months’ time, after failing to raise funds privately. The bailout is expected to temporarily erase concerns and propel the Euro dollar.

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On Thursday of last week, the Statistics Canada reported a 0.4% m-o-m decline in the consumer prices in November. Analysts were expecting only a 0.1% fall in the consumer prices. It can be noted that during October, the CPI (consumer price index) had increased 0.2%. Excluding the eight most volatile items, the core CPI reading fell 0.5% in November, compared with analysts’ anticipation of a 0.1% decline.

The commodity market had a surprise last week when the US Energy Information Administration (EIA) reported a 2.3 million barrel increase in crude oil inventories. The market expected the crude oil inventories to fall by 2.4 million barrels. The price of crude oil is going to be under pressure than usual for the reason that the American Petroleum Institute had reported a drawdown of 4.1 million barrels in the second week of December. Thus, the market was expecting the inventories to decline considerably.

Furthermore, Libya, which is exempted from OPEC production cut, has doubled the output to 600,000 barrels per day. The sluggishness in the price of crude oil would affect Canada’s economic recovery. Thus, fundamentally, the EUR/CAD can be expected to remain in a short-term uptrend.

Technically, the EUR/CAD pair has a firm support at 1.3980. The RSI indicator has crossed into the bullish territory. Based on this, we forecast the currency pair to rise further and reach the next resistance level of 1.4320.

So, the EUR/CAD pair can be traded for profits by taking a long position near 1.4120. By placing a stop loss order below 1.4020, a trader would be able to considerably negate the trading related risk. The profit for the long trade can be taken near 1.4300.

A binary trader can invest in a high or above contract to earn a return of up to 70% from reputed brokers. The investment can be made when the EURCAD pair trades near 1.4140. The trader should also choose an expiry date in the first week of January.

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