And I’m in! I hesitated to jump in at market ahead of the weekend but I was able to get in a short NZD/CAD forex position at a pretty decent price earlier this week. If you’re wondering what in the world I’m talking about, make sure you take a look at my initial trade idea right here.
With crude oil prices still on a tear these days, I decided to just go for it and catch the ongoing NZD/CAD selloff. After all, resistance at the top of the descending channel and at the 61.8% Fib seems to have held.
I’m still short biased on this pair since I think the oil-related Loonie could keep banking on speculations of an oil output freeze and reports of falling U.S. oil rig counts. However, both the Loonie and the Kiwi have central bank events lined up this week, and this might be pretty tricky.
Based on their previous statements, the BOC could maintain a relatively optimistic outlook while the RBNZ could acknowledge the slowdown in their dairy sector (again!). Earlier today, Fonterra announced a new set of downgrades for milk payout forecasts which can’t be good for farmers and producers. Heck, some analysts are even predicting that the RBNZ might cut rates soon!
Also, Forex Gump noted that perhaps one of the reasons why the BOC ain’t too dovish is that the Canadian government is looking into fiscal stimulus (adjustments to taxes and government spending) versus actual monetary easing.
Here are my trade details:
Shorted NZD/CAD at market (.9070), stop loss at .9275, PT at .8825 for around a 1.2-to-1 return-on-risk.
I’ve risked 0.5% of my account on this forex position so if you’re planning on joining me, don’t forget to check out our risk disclosure first.