EURCAD Potential Reversal Zone – Probable Price Path
Global economic data is generally better than expected, and market sentiment continues to improve. In the United States, the financial market were closed Friday, and flows in the foreign exchange market decreased. The US dollar index fell by more than 0.1% Friday, and it fell by 0.3% to 97.2 on a weekly basis for two consecutive weeks. The U.S. Treasury coupon rate last year rose nearly 3 basis points last week, and this morning it rose more than 1 basis point to 0.685%. Both the Eurozone and the United Kingdom’s June Comprehensive Purchasing Managers Index were higher than their estimates, but they have not yet returned to expansion levels. The market is waiting to see whether the US Manufacturing Supply Association’s non-manufacturing index released in June today can get rid of the contraction, and investors are also concerned about the deterioration of the US epidemic. Whether the number of first-time jobless claims announced on Thursday can continue the trend of a continuous decline for 13 weeks will be eagerly eyed. Bloomberg quoted U.S. government officials as reporting that President Trump is considering implementing two to three sanctions against China, and has the opportunity to announce it within a few days at the earliest, but did not disclose details. The “Hong Kong Autonomy Act” passed by the US Congress last week is still to be signed and implemented by Trump. The number of coronaviruses diagnosed worldwide exceeded 11 million. The United States has accumulated more than 2.8 million cases, and Iran and Indonesia have added new deaths in a single day.
EUR:The economic data of the euro zone have seen improvement, and short-term support may continue to support the performance of the euro. The final value of the service area purchasing managers index in the euro zone was revised upwards from 47.3 to 48.3, which was better than market expectations. Eurozone today announced May retail sales data, the market is expected to increase by 15% month-on-month, reversing the two-month decline. European Central Bank President Lagarde said that the euro zone will still face downward pressure on inflation in the next two years, but it is expected to have a chance to reverse in the future, the epidemic may transform the economy quickly, the central bank will maintain loose monetary policy, and need to develop financial instruments to provide funding
CAD: The past week has been interrupted by holidays and the data run has not had much impact. Canada data surprises are turning up and US data surprises are running at all-time highs, suggesting that either 1) market expectations will adjust, lessening the likelihood of an upside surprise for US numbers, or 2) US outcomes risk disappointing heightened expectations. This week may give the CAD a chance to pick up a little fundamental support, with some key data on tap, the headline being Fridays employment data. Broader market sentiment remains bearish on the CAD. IMM positioning remains CAD-bearish and risk reversal pricing, while moderating, still reflects demand for USD calls relative to puts.
From a technical and trading perspective, the EURCAD continues to trade in a well defined range 1.5050/1.5450. Price has recently tested and held the internal ascending trendline support sighted at 1.5200. Bulls will pay close attention to today’s close which could see the long and near term VWAP’s flip bullish. A close at or above current levels 1.5280 (as of writing) should see bullish exposure rewarded setting up a move to retest range resistance towards 1.5400, using today’s low as an invalidation level for the bullish thesis
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