Nibbling on NZD/CAD

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.

NZD/CAD 1 Hour Forex Chart

NZD/CAD 1 Hour Forex Chart

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.

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’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.

Of course, anything can happen in the forex markets, so if the story changes I’ll be sure to reassess and adjust quickly if necessary. Stay tuned by following me on Twitter and Facebook!

  • whenim64

    Hi Pipcrawler, I just read about your NZD/CAD trade idea and it seems to me that the kiwi has appreciated quite a lot against the loonie during the last six months.

    It has been going up through the roof with very little natural retracements. The only upside potential I see in this pair is from .9600 to .9650 and that upside is too small for me to participate in. I feel like a natural retracement down is in the books.

    Good luck with your trade Pipcrawler!

  • Pipcrawler

    Thanks for your thoughts whenim64! You’re right that it has gone up quite a bit, which is why I’m nibbling instead of going with a bigger position. Plus, no one knows where a market will go until it does, which is why we always structure trades to go with good probabilities and give ourselves the potential to receive much, much reward than risked.

    • whenim64

      No problem Pipcrawler. I appreciate reading all the posts from you and everyone else at Babypips.

      • Pipcrawler

        Thanks whenim64 and even though we’re still lowly students of forex trading, we’re grateful that you take the time to check our work out. Good luck buddy!

  • ForExchange

    Hi Pipcrawler!

    The trade idea started out very well but in the last 10 hours the pair shows a retracement. I do not see any reason for that. Neither Fundamental nor technical. Can you please tell me your opinion what do you think what is the reason for the retracement?

    Thanks!

    • Pipcrawler

      What’s up forexchange! For me, I’m in the trade and the market hasn’t given me a reason to exit yet as it hasn’t gone to my pre-determined stop level. We did get positive Canadian data recently that weakens my argument for being CAD short, but it looks like traders took that as a sign to buy back into NZD/CAD. I’m still holding to at least pick up some carry interest. 🙂

  • ForExchange

    And actually I also wanted to ask if you entered the trade or not?

  • John

    I entered as well. At 0.9600. We’ll see. Thanks to positive Carry-Trade, I ain’t worrying about them retracements 🙂

    • Pipcrawler

      Gotta love positive carry right John?! Just make sure you don’t abuse it by overleveraging, k? Good luck buddy and thanks for checking out my blog!

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