The BOC statement is coming up this week, and I think this pair would be a good one to play in case the central bank maintains its stance.
Short NZD/CAD Idea
If you’ve been reading my earlier trade blogs, you probably know that I’ve been trying to short the Kiwi for quite some time. I seem to have missed the NZD/CHF breakdown, but this latest one on NZD/CAD actually has a potentially strong catalyst lined up.
BOC policymakers are expected to keep monetary policy unchanged in their statement this week, but this in itself could prove to be bullish for the Loonie. You see, most central banks these days have been shifting to a more dovish stance on account of geopolitical risks and an ongoing global economic slowdown.
In particular, the RBNZ has shared their intention to cut interest rates sometime this year, and many believe that this could happen as early as next month. This puts the Kiwi on very weak footing versus its rivals.
I’m seeing a double top formation on the 4-hour chart of this pair, with price hovering at the neckline support ahead of the BOC announcement. A break below this could spur a drop that’s the same height as the chart formation or around 400 pips.
Stochastic is already indicating oversold conditions, though, so a bounce off the floor might still be possible. In any case, I’m hoping to catch a breakdown if it happens during the announcement and ride it all the way down to the .8400 area.
Another factor that’s propping up the Loonie these days is the strong surge in crude oil on account of fresh restrictions on global supply coming from U.S. ending sanctions exemptions on Iran, on top of the ongoing OPEC output deal.
What do you guys think of my entry and exit levels?
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