Long NZD/CAD Review

Forex Trade Review: 2014-04-02

After sellers held the area above .9600 like a champ and a broad Kiwi sell off yesterday, it was time to exit this small “nibbler” currency trade.

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

Since I entered NZD/CAD long, the market made several attempts to hold above and break .9600, but the bulls just couldn’t do it (recent CAD strength played a factor).  The pair had been consolidating up until yesterday, in which we saw a broad Kiwi sell off through out the day against the majors.  To be honest, I can’t seem to find the direct catalyst for a turn around in sentiment on the Kiwi (maybe the weak HSBC China Mfg PMI number?), so I think it was more of a technical sell by forex traders taking profits or being more cautious on the Kiwi’s extended run rather than a real shift to bearish sentiment.

Whatever the case may be, the market was taken below the consolidation range pointed out in my original NZD/CAD trade idea, thus invalidating my technical reasons for being in the trade and stopping me out.

Total: -89 pips/ -0.25% loss

In hindsight, I don’t think there is anything I would have done differently; the market just didn’t push higher this time as the Kiwi rally may overextended.  I recognized that as a possible risk in my original trade idea , which is one of the reasons why I went with a “nibbler” position than my usual 0.50% risk.

So, I take a very small scratch to my account trend playing the trend, but it just didn’t pan out this time.  This doesn’t make me any less bullish on the Kiwi, but I’ll be waiting patiently for a pullback now.

What do you think about NZD/CAD? Or is there anything I could have done differently on this trade? I’d love to hear your thoughts, so please leave a comment below!

  • ForExchange

    I also took your trade but in the “consolidation time” I already closed the position at 0.9584. I just didnt feel after a couple of days that this trade has more to give me. The exit point was also the highest point of the pair and brought me 32 pips.

    Thanks for the idea and I wait for the next one.

    Maybe can you write something about GBP/NZD? I am concentrating on this pair now.

    • Pipcrawler

      Congrats for recognizing the shift in market sentiment and bagging a few pips before it dropped! I haven’t done any work on GBP/NZD lately, so I don’t wanna comment on it at this time. But I’ll keep it on my watchlist for now because it does look very interesting. Thanks for pointing it out!

  • John

    I don’t think it was weak Chinese data, since the AUD is not affected this much by it. I’m puzzled as well.

    • Pipcrawler

      Hey John…yeah, it looks like it was the weak ANZ commodity prices data. It’s a tier 3 event, so it’s pretty odd that moved the Kiwi that much. I think China could be a part of the reason why its weakened, and probably the reason we haven’t seem a similar move in the Aussie is the recent shift in sentiment that there will be no further rate cuts. Which means Aussie short positions could be unwinding a bit for a while, but who really knows for sure, right? 🙂

  • Beijin

    Hi Pipcrawler:

    The NZD sell-off may be due to declining dairy prices (according to some analysts).

    Please see: http://www.nzherald.co.nz/economy/news/article.cfm?c_id=34&objectid=11231689&ref=rss

    I was long kiwi, and got to close it when the PA started going down sharply.

    At first I thought it was profit taking before NFP (I also planed to take profit 2 or 3 days before NFP). Then I found the new about the dairy price issue.

    Well, I love long kiwi, for its high positive rollover, and the rate hike expectation. Hope other buying opportunity soon!


    • Pipcrawler

      Thanks Beijin! Yeah, I’m sure there will be other opportunities soon to play a long NZD bias, probably next week. Thanks for sharing and have a great weekend!

  • Lance

    The sell-off was to do with the poor performance of the NZ dairy sector involved in an Asian contract at auction. It fetched a much lower price than was anticipated, which means NZ dairy industry was very badly affected and as a result exports (I think to CHina and other parts of Asia) will suffer in the months to come. It is set to have a big impact on their overall trade balance.


    • Pipcrawler

      Thanks for the heads up Lance. Yeah, when I first read about the dairy sector story, I couldn’t believe it was a catalyst for the big pullback…guess I was wrong! We’ll see how long it lasts and if Kiwi bulls start nibbling back into it.

  • Victor

    Just a retracement that went all the way to 88.2% March,20 to April
    01 sometimes it happens , normaly when there is an unbalanced in between the smart money and the fool’s money

    • Pipcrawler

      Thanks for your thoughts Victor. Quick question…what do you mean by “88.2%”?