Playing the Strong Uptrend in NZD/CAD

Forex Trade Idea:  NZD/CAD

It looks like the resistance around .9200 is breaking on NZD/CAD.  Will forex traders see this as a new leg higher on its way to parity?

Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.

NZD/CAD Daily Forex Chart

NZD/CAD Daily Forex Chart

The uptrend started way back in May of 2013 after the pair bottomed out around the major psychological level .8000.  It’s an understandably strong one as currency traders have been playing the possibility of a the Reserve Bank of New Zealand raising rates, while the trend in Canada’s economic data is weaker than its counter parts (unable to hold unemployment rate below 7.0% and weakening business data).  Will this continue?

Opposite of what my friend Jack the Pipper thinks about the Kiwi dollar, I think the idea of a rate hike by the RBNZ will continue to support the Kiwi in the short-term, and that a weakening China won’t be as big a hit to New Zealand as it is to Australia.

The pair has been in consolidation mode so far in 2014, and after finding support around .9000 – .9050, the uptrend seems to be back on track, especially if this .9250 area gives way to the bulls.  I think it is after some positive New Zealand data today (better-than-expected Trade Balance data), which is why I went long market.  Also, we have Canadian GDP data on Friday, with broad expectations of the number showing the economy shrank last month.

My stop will be the bottom of the range as I’d like to get out and re-assess there, and for this trade, my ultimate profit target is parity.  Here’s what I am doing:

Long full position NZD/CAD at market (.9270), stop at .9050, max profit target at 1.0000

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t follow what I do. Risk Disclosure.

I went in with a full 1% risk to my account, with a potential return-on-risk of 3.31:1.  This is meant to be a longer-term trade, so if it does go my way, I’ll look for opportunities to add to my position and trail my stop to maximize my reward; I’ll see what happens at .9500 before I consider adding.  Of course, if the story changes or price action proves my wrong, I’ll be sure to adjust quickly if necessary. Stay tuned by following me on Twitter and Facebook!

Don’t forget to check out my long-term Long on USD/JPY!

  • Pip Crawler, Thanks for showing us your trades. I actually like this idea but I don’t think I will follow you on this one because it has been going up for too many days in a row. However I will now be watching for a pull back to see if I can get in with you on this trade.

    You have such a big target so it probably is not that important but its a preference that I have in my trading.

    • Pipcrawler

      Thanks for sharing your thoughts Casey. I’m actually out of this trade at the moment, taking profit after the move higher. Now that the pair is back down, almost testing .9200, I’m considering going long again after I do my analysis on Monday. Are you still watching this pair?

  • Good Job on taking profit always good to be able to get back in when there is a retracement. Yes I am still watching this pair and it has pulled back nicely. This is a great pair to trade right now due to the nice trend. The Eur/Cad is also got a good trend in play.

    • Pipcrawler

      Thanks Casesy, but I definitely missed the opportunity to jump in at the better prices offered at the beginning of the week. Doh! How was your trading week?

  • It went great, I got in the NZD/Cad on a retracement and I am loving that trade right now.

    Thanks for the heads up.

    My USDJPY Long we were talking about is doing well also. As well as a nice Eur/JPY Long. The moral of the story when the trends are in play trading is fun.

    • Pipcrawler

      Sorry for the late reply, but yeah you’re right….trading is fun when you’ve caught a trend, and especially when you’re maxing that trend out! I wasn’t able to hang on to the two trades as the Ukraine situation prompted me to step away for a sec, missing out on the moves higher, but congrats to you for catching those bull runs!