EUR/CAD bears eye 1.47 the figure on the downside

• EUR/CAD's upside capped as the carry-trade's euro bid slows down.
• BoC in focus this week and a break of the 1.4780 level opens risk to 1.47 the figure.

EUR/CAD has dropped from the carry trade unwind highs of close to 1.50 the figure as the euro finally gives up the bid on the 1.12 handle, unable to escape the pessimism surrounding the eurozone economy. EUR/CAD will be a keen focus for the week ahead with a focus on the downside should the Bank of Canada's outlook remind markets of their neutral stance. 

"The BoC has been dead silent since the July MPR, leaving markets to interpret incoming data amid a dimming global outlook. While data has been surprisingly robust–Q2 GDP tracking has firmed to 3% from 2.8% in mid-July (BoC: 2.3%) – this is unlikely to placate those concerned by the recent escalation in trade tensions, suggesting a more cautious tone in September,"

analysts at TD Securities explained. 

If the EUR/CAD was looking like a good short with respect to the carry before the unwind of EM-FX, then it must be a bargain at these levels. However, euro's recent rally was a reminder, similar to the Grexit gains, that the euro is a funding currency and has plenty of possible upside to gain on a sell-off in emerging markets. 

Central banks back in play

However for the meantime, central banks could b back in focus this week and with downside risks to the Eurozone continuing to materialise, the Europan Central Bank, (ECB), will continue to debate and study how much further easing, and which type, is needed ahead of its Sept meeting, analysts at TD Securities argued: " While markets are well-priced for a small depo rate cut, they're less certain about QE, and any signals that odds of QE are rising could put further downward pressure on the EUR."

EUR/CAD levels

A break of the 1.4780 level opens risk to 1.47 the figure. A test and follow-through to the downside will open 1.4650 prior support and ten 1.46 the figure, a swing low of late July business. To the upside, 1.5000 is the key target on a break of close above 1.4870.