I’m flipping the script on NZD/CAD, this time to the long side as price action and recent fundie developments seem to have the bulls out in force on this pair. Time for a new trend higher?
New Trend Higher in NZD/CAD?
Last month, I tried to catch the strong downtrend in NZD/CAD, but the fundamental drivers had shifted in the month of October (including weaker oil prices, improvement in New Zealand inflation data, and the expectations of rate hikes from the Bank of Canada being fully priced in) to push the market above the trade invalidation point to close out my trade.
With those fundamental drivers still in play, along with an improvement in global risk sentiment thanks to improving rhetoric on the U.S.-China trade war situation, it looks like that break of lower ‘highs’ in price action may be just the first step in what could be a new trend higher. This move up could also be fueled by the oil markets (oil is Canada’s top export) if crude oil continues to get hammered, which has been recently driven lower by U.S sanctions on Iran.
From a price action point of view, not only are we seeing a break in lower ‘highs’ on the four hour chart above, but we can also see a quasi “inverted head-and-shoulders” pattern that could continue to draw in technical buyers.
And while the break of the lower ‘highs’ and shift in fundies is enough for me to take a trade, I’m gonna throw this into watchlist mode only because of some major events just ahead: the U.S. mid-term elections, the upcoming quarterly New Zealand employment report, and the Reserve Bank of New Zealand’s latest monetary policy decision.
All of these events do have the potential to spark major volatility, most notably the U.S. mid-term elections because a shift of control in the House could possibly fuel the U.S.-China trade war, which is likely a bearish situation for the Kiwi dollar. Once we get those events out of the way, I’ll likely have a plan of action to take a long position if the upcoming events aren’t likely to influence the driving themes for either currency in the pair and the market stays in bull mode.
So, stay tuned for a potential trade soon, 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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