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I will look at CSL as my ‘one to watch’ this week as technically it is doing everything right. No stock in the ASX 200 is showing the same sort of momentum that CSL is exerting right now. If we scan the ASX 200 for stocks trading at a thirty-day high, which closed at or above the top of its Bollinger band, with all moving averages aligned and heading higher and with volume on up days at least 30% above its fifteen day average, then CSL is the only name I can see here. It also closed a new high on Friday and with the ten-day RSI still not above 70, this is a stock that traders will be keen to buy on any weakness.
On Friday we saw the weekly candle complete a ‘gravestone Doji’. This shows exhaustion from the bulls and can flag a potential reversal. If we see a lower low then traders could look more favourably at shorts here. In the next couple of days we get the REINZ house price index and housing sales (no set time), while on Wednesday we get Q4 CPI (expected to print 1.5%) and both these prints could determine whether the pair is on its way lower.
The pair closed on Friday below the 100-day moving average for the first time since September 6. Keep an eye on 1.3524 (the 61.8% retracement of the November to December rally), where a daily close below here could see a more protracted sell-off. I’m also watching EONIA (European money market) rates, which spiked last week to 34 basis points, which is significant given the average from 2013 is nine basis points. Any further moves higher here could prompt the ECB to add liquidity into the markets, which could cause EUR weakness.
In the lead up to the Chinese New Year, we get the usual economic deluge, with Q4 GDP (consensus is for 7.6% growth), December industrial production, fixed asset investment and retail sales on the docket today at 13:00 AEDT. Traders will also be keeping an eye on the Chinese money markets which look like they are moving higher again.
The pair is now at the highest levels since September 2009 after a super strong UK retail sales report on Friday. All eyes fall on this week’s Q4 CPI print in Australia, but as things stand the clear bias is to stay long this cross.