Trade Idea: NZD/CAD Long-Term Range Breakout

It looks like NZD/CAD is trying to break free from its long-term range and fundamentals do support further Kiwi gains. What do you think of this swing setup?

Long NZD/CAD Idea

This weekly range has been intact since early 2014 so seeing this pair move out would be a huge deal in terms of establishing longer-term direction. Resistance is located somewhere around the .9500 to .9600 area so I’m gonna wait for a bit more momentum past this ceiling before going long.

NZD/CAD Weekly Forex Chart

NZD/CAD Weekly Forex Chart

Fundamentals seem to be favoring the Kiwi these days, especially since the latest GDT auction showed yet another strong gain in dairy prices while the quarterly manufacturing sales report printed an impressive 2.2% rebound from the earlier 2.0% decline.

To top it off, RBNZ head Wheeler has explicitly stated that he doesn’t favor “rapid rate cuts” since this might do more harm than good for the economy, particularly the housing market. In other words, the RBNZ is more likely than not to sit on its hands in the next few months!

On the flip side, the BOC has its interest rate decision coming up and words of caution are expected since Canada’s Q2 GDP reading turned out to be a disappointment. Consumer spending and trade activity have also been notably weak as Forex Gump outlined in his Economic Snapshot for Canada.

Here’s my plan:

Long NZD/CAD at .9675, wide 500-pip stop loss at .9175, and ultimate profit target of 900 pips or the same height as the range formation for roughly a 1.8-to-1 R:R. I’ll be risking 0.5% of my account on this trade.

As always, don’t risk more than 1% of your account on a single trade and make sure you read our risk disclosure if you’re thinking of taking the same setups.

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  • Paul Placucci

    I dont see any fundamentals that point to a higher kiwi, its more got to do with a weak usd which has sparked the rally and has increased momentum by herd mentality. RBNZ also stated they see further cuts to rates of .35% and willing to risk further heat in the housing market in doing so. Price has increased more rapidly over the past week on relatively low volume, which is suspect driven by weak money?

    • Cyclopip

      You’ve got a good point there. Speculations of no rate hike from the Fed have boosted risk appetite, which has supported the Kiwi in the past few weeks. Sentiment seems to be turning lately but I think RBNZ Governor Wheeler’s bias against “rapid rate cuts” could keep the Kiwi afloat. Let’s see how it goes!

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  • Cyclopip

    Yikes, thanks for pointing this out. Price is still consolidating right around the resistance for now.

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