Checking out NZD/CAD ahead of many potential catalysts for the pair, and as the price looks ready to head back lower.
NZD/CAD Returns to the Downtrend?
Looking at the economic calendar, we’ve got a bulk of potential catalysts from both New Zealand and Canada to get NZD/CAD moving. Most notable are the latest business confidence data from NZ and the latest jobs update from Canada, and between the two, the Canadian data is likely to be the bigger catalyst. Although we may see it as a non-event like the U.S. jobs report last week since it’s highly likely very bad numbers are already priced in.
We’ve also got the upcoming OPEC meeting, which I think could be the bigger catalyst for the pair as any oil production cut agreement will likely take oil higher and likely drag the Loonie along with it. This is really what I’m looking for, and I think it works well with NZD/CAD as the pair seems to be ready to return to the longer-term trend lower.
On the one hour chart above of NZD/CAD, we can see the pair breaking below the rising ‘lows’ pattern and bouncing afterwards to retest the rising trendline area. Resistance could be forming in this area pretty soon given the potentially overbought conditions as signaled by stochastic, and if it does, traders could jump back into the downtrend.
Now, I know the bearish patterns have already formed, but I think I’ll wait for a slightly better price as a little bounce may be on the way with the upcoming Canadian jobs data. I’m putting my short order for a nibbler position above market for now, and setting my stop to the daily ATR of around 170 pips to give this trade room to breath. My initial target will be the March swing lows. Here’s what I’m doing:
Short half position NZD/CAD at 0.8450, max stop at 0.8625 with 0.50% risk, initial target at 0.8100
I’m only risking 0.50% of my account on this trade, with a potential return-on-risk of around 2:1. But I’ll likely add to this position depending on what we get this week from the economic data and OPEC meeting. If my order isn’t triggered by the end of the week, I look to cancel an move on from this idea.
What do you guys think? Are you watching NZD/CAD for a potential short position as well? Let me know in the comments section below!
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