EUR7CAD is looking for a top at 1.6100 multi-year resistance

• EUR/CAD retreats from 1.6100 multi-year resistance.
• ECB drops the easing bias.

The main event on Thursday is that the ECB press conference is removing the easing bias. The ECB repeated that it might extend the Quantitative Easing if needed. The ECB removed the sentence to increase QE “in terms of size and/or duration” if the inflation outlook or financial conditions were to worsen. This is is a significant change since this sentence was in the introductory statement since 2016. However, during the press conference, Mr. Draghi tried his best to downplay what the dropping of the easing bias exactly entailed. Draghi pointed out that the QE was still intended to “run until the end of September 2018, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim”. The forward guidance on interest rates remained unchanged and Draghi said that the ECB’s reaction function had not been modified.

Since ECB meeting in January, its macroeconomic analysis was unchanged. The recovery stays strong and the ECB’s projections for GDP growth were slightly revised upwards for 2018 to 2.4% (from 2.3% in the December projections) and remained unchanged for 2019 and 2020 (1.9% and 1.7% respectively). As expected by analysts, protectionism was mentioned regarding downside risks to the growth outlook. The downside risks come from protectionism and the exchange rate volatility with the current US economic policies being seen as the biggest risk for the Eurozone economy.

According to the ECB projections, headline inflation is set to come in at 1.4% in 2018 and 2019 and 1.7% in 2019. 

Technically the EUR/CAD made on Wednesday a double top with January 20, 2016, a year earlier as seen on the weekly chart below. 

EURCAD weekly chart

The 1.6100 is certainly a resistance to reckon with and the 4-hour chart is showing signs that the market might have extended itself with the RSI showing a bearish divergence compared to the price. The next key support is seen at 1.5800 with the 23.6% Fibonacci retracement followed by 1.5600 with the 38.2% Fibonacci retracement. Resistance is seen at the 1.6000 psychological level. Further up, the 1.6100 resistance will likely prove to be tough as nail since it hasn’t been broken since 2009. 

EURCAD 4-hour chart