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  • USD May Lose 1.0%-1.8% Vs EUR, CAD, NZD Into August 0 comments
    Jul 23, 2014 12:59 PM

    July 23, 2014 -- Signals from technical levels and momentum, options risk reversals, CFTC positioning indicate potential for USD to correct in coming 2-4 weeks, particularly vs EUR, CAD, NZD.
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    • EUR/USD - signs of bottoming; may rally 1.8% in next few weeks

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    • Momentum oversold, starting to turn higher; RSI up from low since May; stochastics near to crossing higher low since May; MACD differential at low since May

    • Options: 1-mo., 25-d, R/R -0.6225%, rebounding from yday's -0.6925% low since Feb.; suggests potential for FX rebound

    • Potential target: ~1.3700 June 30, July 1 highs

    • Key support: 1.3400 Nov. 21 low

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    • USD/CAD - rally stalling; may fall 1.1% into Aug.

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    • Rally fueled mostly by weak Canadian employment report on July 11; has given way to price remaining at/below 1.0750 past 8 sessions, doji formations two previous days

    • Momentum at/retreating from overbought levels: MACD differential, RSI lower from recent multi-week highs; stochastics high since mid-June

    • CFTC data show traders becoming bullish for CAD; have covered short CAD positions and established first net long since 2013

    • Potential target: 1.0621 July 3 low

    • Key resistance: ~1.0795 50-DMA, July 16 high

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    • NZD/USD - Retracement halted; may rebound 1.8% next 2-4 weeks

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    (click to enlarge)

    • Unable to breach congested support ~0.8640-0.8670 from 38.2% retrace of June-July rally, 50-DMA, late-June lows

    • Momentum at/rising from extreme lows: RSI up from extreme since early-June; MACD higher from bottom since Feb.; stochastics at low since early June

    • Options: 1-mo., 25-d R/R rebounding sharply; rebounds in March, April, May led FX rallies

    • Potential target: ~0.8840 Aug. 2011 high since 1981, July 10 high

    • Key support: 0.8645 mid-June lows, bottom of congested support

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    • NOTE: TJ Marta is an FX strategist who writes for First Word. The observations he makes are his own.

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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