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.
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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