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This fresh consolidation breakout on NZD/CAD makes today’s watchlist. Do the sellers have legs or is there a fakeout ahead?

Intermarket Snapshot

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Fresh Market Headlines & Economic data:

Upcoming Potential Catalysts on the Forex Calendar:

  • Australia AIG services PMI at 10:30 pm GMT
  • Fed’s Kaplan speaks in Toronto at 10:30 pm GMT
  • New Zealand ANZ commodity prices at 1:00 am GMT (Apr. 3)
  • Australia retail sales at 1:30 am GMT (Apr. 3)
  • China Caixin services PMI at 2:45 am GMT (Apr. 3)

What to Watch: NZD/CAD

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

We’ve got strong momentum on NZD/CAD, understandably so after BOC Governor Poloz basically shot down speculation of a rate cut coming for Canada, while the latest business confidence data from New Zealand adds fuel to the growing speculation the RBNZ will cut interest rates this year. Let’s not also forget oil continues to rally its pants off this year, which is likely supporting the Loonie.

On the one hour chart above, we can see that NZD/CAD  has fallen roughly -0.87% from the consolidation area between 0.9080 -0.9140, but is now testing the major psychological level of 0.9000. Will the bulls hold here or are the bears strong enough to break this major area of interest?

Since we’ve already seen a significant move (already a full daily ATR move) it’s possible that the bears could be running out of steam in this area, with stochastics already signaling potentially oversold conditions. If you’re a bear, scaling into a position in this area up to the broken consolidation area is a conservative entry strategy or just waiting for a bounce to get in all together.  Waiting for a bounce also improves the potential R:R, but at the cost of potentially missing the trade.

The bull case is pretty tough to make at this point other than profit taking, but we do have Global Dairy trade data (dairy products are a top export of New Zealand) and commodity prices data that could spark a bullish bounce if they give traders a positive surprise.