Short term
Trade view / 18 July 2016 at 11:40 GMT

NZDCAD weighed down by interest rate cut sentiment

FX Consultant / IFXA Ltd

The NZDCAD rally from the end of May ended last Thursday, when the Reserve Bank of New Zealand announced a surprise intra-meeting economic assessment. The RBNZ said that there wouldn’t be an Official Cash Rate (OCR) decision at the time, and the meeting was merely to provide an update due to the large gap between meetings, but the FX market reacted by selling NZDUSD and NZDCAD anyway.  

Overnight, New Zealand CPI was released, and although it was unchanged from the prior month, it was below expectations, and NZDCAD took another hit.

The intraday NZDCAD uptrend, intact since the end of May, stalled at 0.9545 and then was shattered on Thursday with the RBNZ economic update announcement. Since then, NZDCAD technicals have turned bearish. The downtrend is intact while trading below 0.9230, and looking for a break of support at 0.9120 (50% Fibonacci retracement level of the May/July range to target the 61.80% Fibonacci retracement area.

Management and risk description 

A renewed drop in oil prices would undermine the Canadian dollar and lead to the stop being triggered. Thursday’s RBNZ economic update could be a disappointment to NZDUSD bears, especially if their forecasts just get tweaked and not downgraded.  


Entry: Sell half position of NZDCAD at market (0.9195), balance at 0.9245.
Stop: 0.9285.
Target: 0.9025.
Time horizon: five days.

NZDCAD 30-minute downtrend lines
Source: Saxo Bank 

NZDCAD four-hour, showing broken uptrend line
Source: Saxo Bank 

NZDCAD four-hour, showing Fibonacci retracement levels
 Source: Saxo Bank

NZDCAD five-year daily with moving averages 
Source: Saxo Bank 

— Edited by D. Deacon

Non-independent investment research disclaimer applies. Read more
20 July
Michael O'Neill Michael O'Neill
Update: Cancel second sell order and lower stop loss to 0.9170
20 July
Estuardorlemus Estuardorlemus
Thanks for the update !!


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