EURCAD could be in for a selloff as the pair formed a double top classic reversal pattern and broke below the neckline at the 1.4750 minor psychological level.

Price is pulling up to this broken support level, which might now hold as resistance. 

The 100 SMA is still above the longer-term 200 SMA, though, so the path of least resistance might still to the upside. However, the gap between the moving averages is narrowing to signal a potential downward crossover and pickup in selling pressure. Stochastic is on the move up to signal that buyers still have the upper hand until the oscillator reaches the overbought level and turns lower. 

Data from the euro zone has been mixed so far this week, with the Spanish unemployment change falling short of estimates and the Sentix investor confidence index turning out higher than consensus. Canadian banks were closed for the holiday on Monday so the Loonie has taken its cue from crude oil prices and market sentiment. 

Both the ECB and the BOC have monetary policy statements lined up this week so there could be room for a lot of volatility for this pair. These central banks are among the more hawkish ones so expectations are running high for comments on tapering for the ECB and another potential hike from the BOC.

Disappointment from either central bank could mean big moves for this pair. There have been talks of potential ECB jawboning as the shared currency has been advancing against its peers in the past weeks while the Loonie could stay sensitive to overall risk sentiment and crude oil action. 

By Kate Curtis from Trader’s Way