Taking a short-term technical play on NZD/CAD ahead of top tier Canadian data before the end of the week.
Short-term Pullback on NZD/CAD?
On the one hour chart above of NZD/CAD, we can see the bulls have had a really great week after the pair broke out of the October consolidation and ran up over 100 pips before finding resistance around 0.8680. Sellers have taken the pair back thanks to today’s monetary policy decision by the Bank of Canada to hold the overnight rate at 1.75%, and on positive commentary on the global economy that suggests a rate cut isn’t gonna happen in Canada any time soon.
Looking forward, we’ve still got potential catalysts this week that could keep volatility going in NZD/CAD, most notably the latest employment update from Canada. The latest manufacturing PMI data from Canada suggests that the jobs number could be lackluster, and if that’s the case, that could be enough for a pullback in Loonie bullishness, or even profit taking, ahead of the week.
So, I’m going with a very short-term bullish lean on NZD/CAD, and with a top tier economic data point ahead, I’m going to be conservative with my strategy. I’ll look for a little bit more pullback lower before entering (around the 61% Fib area marked above) to give me a more solid potential return-on-risk, and my stop will be below the previous consolidation range. My max target will be just above the latest swing high and I’ll be using a small position size given the catalysts ahead. Here’s what I’m doing:
Long half position 0.8570, max stop at 0.8490, max target at 0.8690
I’m only risking 0.50% of my account on this trade and I’ve got max potential return-on-risk of around 1.5:1. But I’ll likely cut out of this trade / close orders if the Canada jobs data and reaction do not go my way.
What do you guys think? Are you watching NZD/CAD for a potential long position as well? Let me know in the comments section below!
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