EUR/CAD - EURCAD Daily - 01/17/2023 (GMT)

The euro has continued to make gains against most other major currencies in January so far as inflationary pressures in the eurozone remain high and the ECB seems committed to continuing to hike rates. According to the results of a Bloomberg poll released on 16 January, participants generally expect the ECB’s deposit rate to peak at 3.25% towards the end of the second quarter of the year while core inflation in the eurozone might reach a high this quarter.

Meanwhile the bank of Canada reached 4.25% last month and seems likely to call for another single hike next week. Inflation in Canada isn’t at the same crisis area as in the EU and seems to be dropping more quickly as well, so it might be that the end of this cycle of tightening is near.
On the chart, there seems to be limited scope for the euro to continue upward in the immediate future. The price is close to the 61.8% monthly Fibonacci retracement while the slow stochastic signals overbought and ATR is close to recent lows. The 50% Fibo retracement combined with the 50 SMA around $1.43 seems to be a strong support, though, so further strength might be expected if the price retreats there.
Although comments from various national central banks in the EU suggest that headline inflation doesn’t matter for rates while the core figure hasn’t peaked, traders are still watching Wednesday’s release for a possible surprise. The main event this week remains Canadian inflation on Tuesday afternoon.