We’ve got a potential longer-term setup on NZD/CAD in the works as the pair looks to resume its recent bearish shift in directional bias.
Resistance at Fibs on NZD/CAD?
We’ve got the daily chart above of NZD/CAD, and we can see that the tide may be turning for the pair towards a bearish bias. This may be a reaction to the latest monetary policy statement from the Bank of Canada, which traders took as a cue that stimulus tapering may be in the cards from the BOC this year.
And the week prior, we heard from the Reserve Bank of New Zealand, which held monetary policy as-is despite an uptick in business sentiment and inflation. Unfortunately for Kiwi bulls, the RBNZ maintained its stance on holding policy due to uncertainty with inflation, and that the economy looks far off from overheating.
With these two themes combined, it looks like the fundamental bias favors the Loonie over the Kiwi, and with the market holding the 0.9000 major psychological handle / Fibs area as resistance, we may be getting a price confirmation that a fresh move lower is upon us.
So, if you are bearish on the pair, shorting around the 0.9000 area is something to consider for a medium to longer-term position. With a stop right above the Fibs and a max target around the next major support area around 0.8600, you get a solid short-term potential return-on-risk of over 1:1.
But if you’re considering a longer-term position given the divergent central bank policy theme, then targeting the major support area around 0.8200 gives you a strong starting potential return-on-risk of around 4:1 when considering the area above the Fibs as a stop guide.
Are you also bearish on NZD/CAD for a longer-term position? Or do you think the Kiwi will get its edge back on the Loonie as it did over the past year? Let me know in the comments section below!
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