The Kiwi has been on a tear recently against the Loonie, but now testing a major area of interest. Time for the Loonie bulls to rejoin the party?
Major Resistance Ahead on NZD/CAD?
February economic data has been kind to Kiwi bulls with New Zealand jobs, inflation and sentiment data coming in better-than-expected,while Loonie bulls have had a more difficult time as Canadian jobs, trade and business sentiment data have disappointed.
This string of economic data is likely the reason we saw a NZD/CAD extend its recent rally from the December 2017 lows around .8642, pushing up almost another 300 pips since the beginning of February.
But this brings the market to a major area of interest, the area between .9200 – .93500 which served as major support from around July 2016 to July 2017 before breaking to the downside. Could this area turn into a “broken support-turned-resistance” situation?
We’ll have to wait and see, but for now, I think it’s a pair that’s worth watching because despite the recent string of unfavorable data for the Loonie, I think it’s still a possibility for the Bank of Canada to hike rates further, but for the Kiwi, the downgrades to the inflation outlook by the Reserve Bank of New Zealand likely puts underlying pressure for now.
With that said, I’m fundamentally bearish on NZD/CAD in the mid-to-longer-term, and now that there’s a technical setup in the works on the daily chart, I’m in full watch mode on the pair.
Once I see some resistance or bearish reversal patterns develop and if the economic data starts to shift more in favor for the Loonie, I’ll likely throw on some orders or jump in the market and update my blog here. Stay tuned for updates and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.
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