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Checking out the trend lower in NZD/CAD ahead of a top tier catalyst from New Zealand coming soon.

Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on GBP/JPY ahead of U.K. unemployment data, so be sure to check that out to see if there is still a potential play!

Intermarket Snapshot

Equity Markets Bond Yields Commodities & Crypto
DAX: 12915.31 +1.80%
FTSE: 6125.25 +1.23%
S&P 500: 3369.55 +0.27%
DJIA: 28090.83 +1.08%
US 10-YR: 0.642% +0.068
Bund 10-YR: -0.475% +0.05
UK 10-YR: 0.195% +0.062
JPN 10-YR: 0.028% +0.021
Oil: 42.38 +1.05%
Gold: 1960.70 -3.87%
Bitcoin: 11,580.96 -2.44%
Ethereum: 386.47 -2.31%

Fresh Market Headlines & Economic Data:

U.S. small business optimism falls in July to 98.8: NFIB

U.S. producer prices increased by 0.6% m/m in July vs. 0.3% expectations

In virus talks, Pelosi holds firm while Mnuchin wants a deal

Canada Housing starts in July at 204K vs. 199K in June

German economic expectations rise: ZEW survey

U.K. jobs picture looks bleak with 7.5 million furloughed or away from their job

Global coronavirus cases top 20M as Russia approves vaccine

Upcoming Potential Catalysts on the Economic Calendar for U.S. & Asia:

Fed Daly speech at 4:00 pm GMT
API Crude oil inventory at 8:30 pm GMT
New Zealand Visitor Arrivals at 10:45 pm GMT
Japan M2 Money supply at 11:50 pm GMT
Australia New Home Sales, Consumer confidence at 12:30 am GMT (Aug. 12)
Australia Wage Price Index at 1:30 am GMT (Aug. 12)
RBNZ Monetary Policy statement at 2:00 am GMT (Aug. 12)

What to Watch: NZD/CAD

NZD/CAD 1-Hour Forex Chart
NZD/CAD 1-Hour Forex Chart

On the one hour chart of NZD/CAD above, we can see that the trend has been a very good friend to the bears, having dropped over 200 pips since topping out around 0.9000 at the end of July. And we may be seeing a new leg lower as the pair just broke a minor support area 0.8800, which may draw in technical sellers.

And we may have a pick up in volatility coming with the latest monetary policy statement coming from the Reserve Bank of New Zealand that could draw in more bears. At the moment, expectations are for the RBNZ to hold on monetary policy, so the commentary from RBNZ Governor Orr will be closely watched.

With recent data showing improvements, the odds are that we won’t see hints of additional stimulus, but with a new spike in COVID-19 cases just today, there is a possibility of cautious rhetoric from Orr.

So for the bears on NZD/CAD, the odds are in your favor, especially if oil continues to outperform the other asset classes on the session. But with a top tier catalysts ahead, it’s probably a good idea to wait for a bounce up to the falling ‘highs’ pattern and previous levels of interest /  bearish reversal patterns before considering a short position. For the more aggressive, considering a scale in entry strategy to reduce the risk of missing out on a move lower.

For the bulls, surprise bullish commentary from the RBNZ and a fall in oil prices (possibly on fears of economic slowdown) is the scenario to watch before considering a long position.

In this low probability scenario, a break back above the falling ‘highs’ pattern is the signal that could draw in buyers, or watch out for a retest of the 0.8700 handle and bullish reversal candles before considering a long play.