Introduction
The foreign exchange market remains one of the most technically driven and sentiment-sensitive sectors in the financial world. Among the key currency pairs attracting attention from technical analysts is the Euro/Canadian Dollar (EUR/CAD), especially due to its recent formation of corrective structures and the presence of recognizable Elliott Wave patterns. This article provides a comprehensive analysis of the EUR/CAD pair based on the Elliott Wave Theory, supported by classical technical indicators, fundamental sentiment, and historical price behavior.
Understanding The Elliott Wave Foundation
Before diving deep into the EUR/CAD pair specifically, it is important to understand the underlying theory guiding this analysis. The Elliott Wave Theory, developed by Ralph Nelson Elliott in the 1930s, posits that financial markets move in repetitive cycles or “waves” influenced by collective investor psychology.
These waves are structured into a 5-wave impulsive pattern followed by a 3-wave corrective pattern. Impulsive waves (labeled 1 through 5) align with the trend direction, while corrective waves (labeled A, B, C) occur against the trend. These patterns appear across all timeframes, making Elliott Wave theory highly scalable for short-, medium-, and long-term trading strategies.
When applied to forex trading—particularly to the EUR/CAD pair—Elliott Wave analysis helps traders forecast price direction, identify potential reversal zones, and establish disciplined risk/reward strategies.
Current Technical Setup: EUR/CAD At A Critical Juncture
As of July 25, 2025, the EUR/CAD pair is undergoing a correction phase after a completed impulsive wave up. ActionForex’s most recent analysis identifies this as part of a larger degree wave (4) pullback within an ongoing bullish cycle. The structure is beginning to show signs of a completed A-B-C corrective wave, suggesting the market may be preparing for a fresh rally—the start of wave (5).
Price action has been consolidating between the 1.4550 and 1.4800 zones, which forms a classic flat correction or potential triangle formation, both typical of wave 4 behavior. These corrections often confuse retail traders, but for Elliott Wave practitioners, they offer strategic entry points ahead of trend continuation.
The analysis shows the following:
- Wave A completed near 1.4720.
- Wave B retraced to 1.4780.
- Wave C currently testing support near 1.4600.
If wave C holds and the market reverses, a breakout above the 1.4800 resistance would signal the start of wave (5) toward the 1.5000 psychological level or higher.
Sub-Wave Structure: Labeling The Internals
Wave counting can vary slightly depending on timeframe and interpretation, but a general agreement among analysts is forming:
The initial impulsive move (Wave 1 to Wave 3) took EUR/CAD from around 1.4200 to 1.4900, establishing a robust upward trend.
The corrective Wave 4 is characterized by lower volatility and overlapping candles, typical of consolidation rather than reversal.
Within Wave 4, the sub-waves A-B-C have played out as zigzag corrections, with Wave C nearing completion.
The correction is respecting the Fibonacci levels—particularly the 38.2% retracement, which aligns with the price range around 1.4580. This is a common level for wave 4 to find support in strong uptrends.
Technical Indicators Support The Bullish View
Aside from the Elliott Wave count, several classical indicators are aligning with this wave analysis:
1. Relative Strength Index (RSI)
The RSI on the 4H and Daily chart is holding above 40, which suggests the pair is not in a bearish momentum phase. Dips are being treated as buying opportunities, typical in wave 4 consolidations.
2. MACD (Moving Average Convergence Divergence)
The MACD histogram is showing a bullish crossover on the 4H chart. While the MACD line remains slightly under the signal line, the momentum is shifting back toward the upside, supporting the hypothesis of a Wave 5 emergence.
3. Moving Averages
The 50-day EMA is flat, while the 200-day EMA is still rising. Price is consolidating above both lines, hinting at accumulation and a potential breakout to the upside.
Key Resistance And Support Levels
To effectively trade the EUR/CAD in its current Elliott Wave structure, traders should monitor the following levels:
Support
- 1.4580 (Wave C low / 38.2% Fib).
- 1.4500 (Psychological support & key structure zone).
Resistance
- 1.4780 (Wave B high / neckline of correction).
- 1.4925 (Previous Wave 3 top).
- 1.5050 (Projected Wave 5 target).
A sustained breakout above 1.4780 would confirm a bullish breakout and indicate a new impulsive move is underway.
Macroeconomic Backdrop: EUR And CAD Drivers
No technical analysis is complete without the context of fundamental drivers. The movement in EUR/CAD is influenced by macro events from both the Eurozone and Canada.
Eurozone Factors
Inflation remains sticky across major EU economies, prompting the European Central Bank (ECB) to maintain a cautious tightening stance.
German economic data has been mixed, showing weakness in manufacturing but strength in services.
Political uncertainty in France and southern Europe is weighing on long-term Euro confidence, although it hasn’t triggered capital outflows yet.
Canadian Factors
The Bank of Canada (BoC) recently paused rate hikes after a series of aggressive moves in 2024, citing softening inflation.
Oil prices, a key factor for the CAD, have been fluctuating due to global recession fears and OPEC+ output decisions.
Trade balance remains slightly positive for Canada, but not enough to offset capital inflows into the Euro.
Taken together, this environment favors Euro strength relative to the CAD, especially if commodity prices fail to recover. This aligns with the potential Wave 5 rally forecasted in the Elliott Wave structure.
Potential Scenarios For EUR/CAD
Bullish Scenario (Wave 5 Initiation)
- Price finds support near 1.4600.
- Breakout above 1.4780 triggers buying interest.
- Final wave (5) targets 1.5000–1.5100 in a strong impulsive pattern.
- Technicals confirm with rising RSI, MACD crossover, and upward price action.
Bearish Scenario (Extended Wave 4)
- Price fails to break above 1.4780.
- Drops below 1.4580 and heads toward 1.4450.
- Possible triangle correction forming, delaying the final wave (5).
- Breakdown could signal trend exhaustion rather than continuation.
While both are viable, current evidence supports the bullish case, provided no major macro shocks emerge.
Trading Strategy For Active Traders
Traders looking to capitalize on this setup should consider the following guidelines:
Entry Point
- Aggressive entry near 1.4600 with tight stop below 1.4500.
- Conservative entry above 1.4800 on breakout confirmation.
Stop Loss
- Below 1.4500 to protect against failed wave structure.
Take Profit
- Tiered targets at 1.4920, 1.5000, and stretch target of 1.5100.
Risk/Reward
- Maintain a minimum 1:2 ratio, ideally 1:3 or better on breakout trades.
Long-Term Outlook: Are We In A Larger Bullish Supercycle?
Zooming out to the weekly chart, the EUR/CAD has shown a long-term bullish bias since early 2023. The current structure may be part of a larger primary wave (3) that began from 1.3600. If that’s the case, wave (5) could push the pair toward multi-year highs near 1.5200–1.5500 over the next few quarters.
Traders and analysts who follow long-wave supercycles might see this as a pivotal moment to build swing trade or position trade portfolios.
Risk Factors To Watch
Despite the bullish analysis, several risks must be noted:
- Unexpected ECB dovish shift due to political instability.
- Canadian economic surprise, such as strong inflation or employment.
- Oil price surge, boosting CAD.
- Technical failure to confirm breakout, invalidating the wave count.
Elliott Wave is a powerful tool but not infallible. It requires constant adjustment and confirmation with price action and supporting indicators.
Conclusion
The EUR/CAD pair is currently positioned at a pivotal point in its Elliott Wave journey, and all signs suggest the correction phase is ending. The formation of a completed A-B-C correction near strong support areas combined with momentum shifts in RSI and MACD all favor a bullish continuation scenario.
Traders who can correctly interpret this wave setup and manage their risk stand to gain from the anticipated breakout. However, caution and disciplined technical confirmation are essential, especially when dealing with a pair as sensitive to both European and North American data.
