Good evening forex friends! As I mentioned in on of my lasts posts, I’m moving my CAD short bias into a small NZD/CAD position.
Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.
I’m still bullish on the New Zealand dollar, an argument that’s been recently supported by this month’s rate hike and comments from the RBNZ. And as you can see from my recent trade ideas, I’m relatively bearish on the Canadian dollar. My conviction recently increased after BOC Gov. Poloz commented that a rate cut is not out of the question, but Friday’s release of positive Canadian retail sales and CPI numbers have dampened CAD bearishness for now. Overall, it looks like monetary policy will tighten faster in New Zealand than in Canada, making this trend in NZD/CAD still very attractive to me.
But because I think a lot of the Kiwi’s rate hikes have been priced in ahead of time, I’m gonna hop in this position a little slow and wait for a confirmation of a move higher before getting bigger in the trade. With the pair pulling back and consolidating from recent highs (and stochastic showing oversold conditions), I think now is a good time for me to start nibbling on NZD/CAD. Here’s what I am doing:
Long NZD/CAD quarter position at market (.9574), stop at .9485, no profit target at this time.
I’m only risking 0.25% of my account on this one, and looking for this to turn into a longer-term position as I think the trend still has potential for a very nice return-on-risk. If it does go my way, I look to enter another unit of risk with a break and hold above the recent swing highs around .9650.