NZD/CAD hits the radar today with a big catalyst for the Loonie coming soon. Will this classic consolidation pattern turn into a breakout setup?
NZD/CAD Downside Wedge Break?
We’ve got a pretty solid technical setup forming on NZD/CAD today, which has a chance to play out very soon with a major economic catalyst for the Loonie just ahead. Tomorrow, we’ll get the latest employment update from Canada, and if we get another positive surprise as expected (+90K net job gains, Unemployment rate to fall to 8.0% forecast), then the recent pullback in the Loonie may be another opportunity to pick up a currency in a longer-term upswing.
On the four hour chart, we’re looking at structing a potential short position around the rising wedge formation. This is coming together around the Fibonacci retracement area, and just below the previous consolidation area between 0.8930 – 0.9000. We can also see bearish divergence between price action and stochastic that could draw in technical bears for a short-term position.
If the Canadian jobs data does come out positive, then we’ll be on the lookout for a downside break of the rising wedge. This may signal to forex traders to jump in and turn it into a momentum play, with potential to take the pair down to the strong support area around 0.8760 within a few sessions (based on daily ATR of around 60 pips).
NZD/CAD bears should also consider scaling into a short position if there is fear of not getting in at a better price. Or for the more conservative traders, wait to see if the pair pops higher before/after the event to get in at an even better price.
Of course, we may get surprised with negative numbers from Canada, but given the massively positive read from yesterday’s Ivey PMI employment component (62.7 in March vs. 54.0 in February), the odds are very low of a negative read tomorrow from the government’s numbers. In case we do see a surprise negative read, we will quickly adjust our position/orders, and possibly even look to short CAD if the data and market reaction makes sense to do so.
So, what do you all think? Are you watching NZD/CAD to play the Canadian employment data? Are you bullish or bearish on the economy? Let me know in the comments section below!
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