EURCAD pulls back after breakout – technical and fundamental analysis

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The Euro has demonstrated an outstanding performance at the start of 2025, largely unchallenged by a particularly weak Canadian Dollar early in the year.

After trading within a 1.40 to 1.50 range for the past four years, the EUR/CAD pair broke out higher, now testing its year-beginning highs. This surge coincided with European nations uniting on plans to significantly increase investment within the EU, particularly in infrastructure and military sectors.

Mirroring this focus, Mark Carney recently announced Canada's commitment to raising military spending to 2% of the nation's GDP. This notable increase could provide a similar boost to the Canadian Dollar as seen with the Euro, though the scale of its impact remains to be seen.

In broader geopolitical news, ongoing trade deal discussions between the US and Canada are currently underway, with markets keenly awaiting further headlines.

The Canadian Dollar hasn't exhibited independent movement in recent weeks, largely tracking the US Dollar's trajectory. This suggests markets are increasingly sensitive to broader geographical shifts. A similar trend is observable in Asian-Pacific currencies, which have predominantly moved in sync across most forex sessions.

Both the European Central Bank (ECB) and the Bank of Canada (BoC) are nearing the end of their respective rate-cutting cycles, with current deposit rates standing at 2% and 2.75% respectively. Markets are pricing in approximately one more rate cut from each central bank by year-end. This forward pricing is typical, acting as a premium against a potential significant slowdown in economic activity.

EURCAD Analysis from the Weekly to intra-day timeframes

EURCAD Weekly

EURCAD Weekly Chart, June 12, 2025 – Source: TradingView

Prices had already recovered strongly from the 2022 lows in the pair, and consolidating in the more historic 1.40 to 1.50 range.

Only weekly overbought conditions in the weekly RSI and a slowdown in the Euro's strength calmed the breakout in EURCAD – as Weekly Moving averages are standing way below current prices, as they are slower to react by definition.

Prices failed to reach the 2020 highs located at 1.5990 and are still consolidating closer to a 1.56 to 1.58 range.

Keep an eye on all significant levels indicated on the chart above, and let's dive into a closer to spot current developments.

EURCAD Daily

EURCAD Daily Chart, June 12, 2025 – Source: TradingView

The pair had been stabilizing in the 1.56 to 1.57 range before breaking out this morning.

Three important elements to notice:

• Prices swiftly rejected a breakdown attempt on May 12, confirmed by a daily closing candle at the session lows, subsequently returning within the established range. This action confirmed the strong rejection of the preceding 2020 Support level at 1.5480.

• The market currently appears to be holding the Daily Moving Average 50, a key level that warrants close monitoring for potential trend shifts.

• A failure to decisively break above the March 2025 highs at 1.5860 could result in a scenario similar to the May bearish breakdown attempt. Such a development might also contribute to the formation of a Head and Shoulders pattern, which is yet to materialize.

EURCAD 4H

EURCAD 4H Chart, June 12, 2025 – Source: TradingView

The breakout came after particular Euro strength and USD weakness – The Loonie hasn't been selling per-se.

These dynamics seem to be taken in account as markets are pulling back just ahead of the March 2025 highs. More developments are awaiting for the Canadian Dollar.

Momentum had been consolidating since the 1st of May, and the size of the move up from the breakout is similar to the one from the May 12 breakdown – A continuation of the move from this morning would invalidate the harmonic pattern scenario represented with the purple squares.

May Range highs are located around 1.57 and the lows are just below 1.56

Any consolidation above points towards a test of the 2025 highs, although the rejection from overbought 4H RSI indicates higher odds of re-entering the May range.

Safe Trades!

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