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John J Hardy
In this #Saxostrats, John Hardy on why he's looking to short NZDCAD in a longer term FX trade.
Short term
Trade view / 17 August 2016 at 12:45 GMT

NZDCAD trend is your friend with benefits

FX Consultant / IFXA Ltd
Canada
Instrument: NZDCAD
Price target:
Market price:
Background

NZDCAD embarked on a steady rally on May 27, rising from a low of 0.8688 to a high of 0.9575 on August 10. It has since declined and is currently hovering just above the uptrend line. If the trend is your friend than this trend is your friend with the benefit of a clear exit from the trade. NZDCAD has chopped around within a 0.9290-0.9405 range for the past week and the bottom of that range is also uptrend support from the end of May low.

NZDUSD has the advantage of still high interest rates and even thought the Reserve Bank of New Zealand is likely to cut them again, they are still high enough to keep NZDUSD in demand by yield seekers. The latest Global Dairy Trade auction had whole milk prices at a 10-month high, another positive for NZDUSD.

The Canadian dollar has rallied on the back of rising oil prices but the rally in WTI appears to have stalled out just below $47.00.

Today’s FOMC minutes may disappoint those traders seeking clarity on the Fed’s interest rate outlook. The latest batch of Fed speakers have provided a variety of opinions suggesting a lack of a unified view. The prospect of low rates for longer should benefit NZDUSD more than USDCAD.

Management and risk description

This trade is vulnerable to the FOMC minutes being deemed hawkish. It is also vulnerable to an extended rally in oil prices which would boost the Canadian dollar. The stop is also vulnerable to better than expected Canadian Retail Sales and CPI data on Friday.

Trade view parameters

Buy NZDCAD at market (currently 0.9310)

Stop: 0.9260

Target: 0.9450

Time horizon: 4 days

NZDCAD 30-minute showing intraday support from July 27:
nzdcad
 Source: Saxo Bank

NZDCAD 1-hour highlighting trading range:
nzdcad
Source: Saxo Bank 

NZDCAD daily noting uptrend line from May:
nzdcad
 Source: Saxo Bank
 
NZDCAD 5-year daily with moving averages:
nzdcad
Source: Saxo Bank 

— Edited by Clare MacCarthy

Non-independent investment research disclaimer applies. Read more
17 August
Market Predator Market Predator
Nice trading idea Mr. O'Neill. I also prefer the same form of chart (using bars instead of candles).
17 August
Vakas Vakas
9260 is 61% Fibonacci retracement of 9080 and 9563.. don't you think it may hit 9260?
17 August
Michael O'Neill Michael O'Neill
It could. But The trade was determined by the uptrend line from the May low. IMHO, if it breaks, the uptrend is over and we will go a lot further than .9260. I only put the stop at .9260 to avoid getting taken out on a spike move.
17 August
Vakas Vakas
Ok.. Best of luck
19 August
Estuardorlemus Estuardorlemus
Hi Mike. Any update ????
19 August
Michael O'Neill Michael O'Neill
Yes, sorry. Raise the stop loss to break even and lower the take profit level to 0.9375.
19 August
Estuardorlemus Estuardorlemus
Thanks ! ;)
21 August
izwansamba izwansamba
tq sir. I follow you about 2 month. Great result

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