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News that the EU and the UK had agreed a 21-month Brexit transition deal propelled sterling higher yesterday but some gains were subsequently lost as doubts crept in. Sterling faces a difficult week between today's CPI, tomorrow's BoE meeting and the EU summit in Brussels on Thursday and Friday.
Medium term
Trade view / 14 July 2016 at 4:24 GMT

NZDCAD: Awaiting completion of two-year bottoming structure

Managing Director / Technical Research Limited
New Zealand
Instrument: NZDCAD
Price target:
Market price:

The New Zealand dollar is a touch weaker in Asian trading today but remains uncomfortably high for the Reserve Bank of New Zealand who faces a dilemma. See background here: FX market intervention might be the only way out for RBNZ.

Monday’s inflation update will be the key to its direction leading into the Monetary Policy Statement on August 11 where market pricing suggests a one-in-three chance of a rate cut. The Bank of Canada has a similar problem with a surging housing market, which is one reason it didn’t cut rates in its own policy review yesterday. But of more immediate concern for the CAD is the oil price which seems to be coming under renewed pressure.

Management and risk description

The dominant chart structure in NZDCAD is a developing two-year Inverse Head & Shoulders reversal formation (refer daily chart below). Already, key Neckline resistance has been tested and NZDCAD’s reaction from this resistance presents a buying opportunity.

Short-term support now lies around the 0.9300 level, to yield another attempt at key Neckline resistance (around the mid 0.9500s area. Upon completion of this reversal structure (on a sustained break above Neckline resistance) an upside objective projection toward the 1.0800 level will be given.


buying NZDCAD on a close above 0.9550.
Stop: 0.9441, initially. 

Target: 1.0780  

Time horizon: allow several months for target to be met.  

NZDCAD daily chart (click to expand)
NZDCAD daily
 Source: ThomsonReuters

NZDCAD weekly chart (click to expand)
NZDCAD Weekly chart

Source: ThomsonReuters. Create your own charts with SaxoTrader; click here to learn more 

— Edited by Gayle Bryant

For more on forex click here

Non-independent investment research disclaimer applies. Read more


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