29 July 2025,05:59
Daily Market Analysis
29 July 2025, 05:59
Key Takeaways:
*The Canadian dollar weakened ahead of the BoC’s July 30 rate decision, as weak domestic data and looming U.S. tariffs raise the likelihood of a rate cut.
*Former President Trump’s 25% tariff threat on Canadian imports adds trading risk, with stalled trade talks compounding uncertainty for Canadian markets.
*The euro slipped after the U.S.-EU trade agreement, as market skepticism and eurozone growth concerns over the deal that seems favouring the U.S..
Market Summary:
The Bank of Canada is set to announce its rate decision on July 30, a pivotal event that could significantly influence the Canadian dollar. In the lead-up to the announcement, the loonie has softened against its major peers as investors weigh mounting economic headwinds and rising geopolitical uncertainty.
At the forefront is the looming tariff deadline set by former President Donald Trump, who has threatened to impose a 25% tariff on Canadian imports to the U.S. The absence of meaningful progress in trade negotiations has heightened exchange rate risk for the loonie, while broader concerns over cross-border economic cooperation continue to mount.
On the domestic front, Canada’s economic indicators have painted a lackluster picture. GDP growth remains marginal, retail sales are showing signs of slowing, and the unemployment rate has risen to 6.8%. These developments, coupled with external trade threats, could prompt the BoC to consider an additional rate cut during Wednesday’s policy meeting.
Euro Slips Despite U.S.-EU Trade Deal
Meanwhile in Europe, the euro weakened sharply—even after the European Union and the U.S. reached a last-minute agreement to avert a potential trade war ahead of the August 1 deadline. Although the deal removed immediate tariff threats, it was met with skepticism by markets and criticism from within the EU, with some officials arguing that the agreement could prove detrimental to the region’s long-term economic interests.
The market’s negative reaction reflects broader concerns about the eurozone’s growth trajectory, particularly as internal divisions and external headwinds continue to weigh on investor sentiment.
Technical Analysis
EURCAD, H4:
The EUR/CAD pair has retreated sharply from its recent peak of 1.6134, plunging over 1% in the latest session and erasing gains from the previous four trading days. The move has formed a bearish engulfing candlestick pattern on the daily chart—a strong technical signal suggesting the emergence of bearish momentum.
Despite the downside break, the steep decline has left a fair value gap, opening the door for a short-term technical rebound as the market seeks to retest broken levels. The psychological resistance near the 1.6000 mark may act as a ceiling, potentially capping any corrective move.
From a technical standpoint, the Relative Strength Index (RSI) is approaching oversold territory, hinting at short-term exhaustion. However, the MACD has crossed below the zero line and is diverging further, reinforcing the bearish bias.
Traders may look for opportunities to re-enter the downtrend upon confirmation that any rebound attempt has stalled, particularly if price action fails to break above the 1.6000 resistance zone.
Resistance Levels: 1.5975, 1.6050
Support Levels: 1.5900, 1.5815
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