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USD/CAD is in one of the strongest trends of the majors. Traders have done a major about turn in their thinking around the CAD of late, given the rebound seen in inflation. The pair is oversold, with the nine-day RSI at 16 and stochastic at extreme lows. USD/CAD is also approaching the ABC target drawn from the March 20 high at 1.0632, so we may see one final squeeze lower to here and then possibly some consolidation. Traders who sold the break of the 200-day moving average last week have done nicely, but my preference would be to sell rallies from here, with 1.0730 (the 23.6% retracement of the recent sell-off) a possible level to work offers.
I’ll be looking at this pair in more depth this week, with the technical picture looking quite compelling for long positions. The pair broke and closed above and the April high and the 50% retracement of the 2014 high to low. The pair is a touch overbought, but the trend is strong and this will help shape my bias.
On Friday we saw EUR rally against a number of G10 currencies on the back of a slightly higher-than-forecast German CPI print. At 7pm AEST we get revisions to the eurozone’s aggregate ‘flash’ CPI print, with economists expecting inflation to be revised up a touch to 0.6% - a number below this would be a negative for the EUR. It promises to be a big week for the USD with a raft of key economic data due and I will looking very closely at the ISM manufacturing report on Tuesday at midnight (AEST), given how this feeds into Q2 GDP. We’ve seen a strong move higher in the pair of late after hitting 1.3503 on June 5, however key resistance is seen just above current levels, with 1.3672 both the 200-day moving average and April 4 low. Above here 1.3691 is the 38.2% retracement of the April to June sell-off and this seems a good level to potentially re-initiate shorts.
Toll Holdings (TOL)
A very interesting technical set-up can be seen on TOL. On the weekly chart we’ve seen the stock close below the July 2012 uptrend, although there seems to be good buying coming in on moves down to A$5. A close below A$5 is needed for the sell-off to continue. On the daily chart we can see that TOL has reverted back to the 20-day moving average after testing the lower Bollinger band, so it will be interesting to see if sellers come back in. The downtrend drawn from the February high comes in at A$5.80.