For my first trade idea for 2019, I’m looking at this long-term descending channel resistance on NZD/CAD ahead of the BOC decision.
Short NZD/CAD Idea
I spotted this neat technical setup from Forex Gump’s weekly preview, and I thought it’d be a good pair to watch since the Loonie has a top-tier catalyst to look forward to.
Apart from the top of the daily channel keeping gains in check, there was also a bearish divergence that confirmed a return in selling pressure. This could give the pair enough momentum heading south, at least until the mid-channel area of interest around the .8600 handle.
I’m having second thoughts about jumping in at market, though, since stochastic is already dipping into the oversold region. Besides, the BOC is due to announce its policy statement soon and anything remotely disappointing could spur a sharp CAD selloff.In particular, I’m on the lookout for actual monetary policy report that contains more insights on the BOC’s economic outlook. Governor Poloz’s remarks during the presser should also make things more interesting and possibly more volatile for the Loonie.
Key points I’ll be keeping tabs on are their take on the U.S.-China trade relations and where crude oil might be headed next. Should Poloz discuss the resilience of the Canadian economy and highlight the stronger than expected jobs release last week, NZD/CAD could see more downside.
As for the Kiwi, there’s not much on its docket this week so I’m thinking this currency will take its cues mostly from sentiment. Aside from that, dollar price action from U.S. top-tier catalysts and the mood during the trade talks could also push this higher-yielding currency around.
I’m not feeling gutsy enough (yet) to open a position ahead of the BOC decision, so I’m probably gonna hold out for another possible test of the channel top. Besides, risk-taking might still pick up as traders keep their fingers crossed for positive trade developments.
What I do know for sure is that I’ll be watching the .9000 to .9100 levels very closely to see if a bounce or break is happening. As I’ve told myself in my Q4 2018 review, I gotta be flexible in switching biases when the situation calls for it!
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