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I’m checking out NZD/CAD this week as the pair’s recent momentum move lower may be stalling.

With the possibility of a bounce ahead, can I get in the fresh downtrend at a better price?

Fib Short Setup on NZD/CAD?

NZD/CAD 1-Hour Forex Chart
NZD/CAD 1-Hour Forex Chart

With recent speculation of negative rates coming from the Reserve Bank of New Zealand, I’ve been checking out short setups on the New Zealand dollar and found this potential trade in NZD/CAD.

At the end of July, the currency pair topped out around the 0.9000 major psychological area and slowly trended lower, again, likely on speculation the RBNZ will need to move to negative interest rates at some point in the future.

The pair actually traded sideways last week, but yesterday to today’s swift move lower suggests NZD bears are very much in charge. 

With the sell-off apparently losing steam (signaled by the Stochastic indicator showing oversold after a nearly two daily ATR move), chances are increasing of a bounce ahead. If so, I’m looking to put up a short position at the Fibonacci retracement area to continue to play the negative interest rate sentiment in the markets currently being played out in the Kiwi.

But I’m only looking to do so if the upcoming oil inventory data from both API and EIA show a decline in inventory numbers and the upcoming inflation data from Canada surprises with a read above expectations.

So, that’s the scenario I’m looking for before entering a short position, and if it plays out, I’ll set up a scale in entry strategy at the Fibonacci retracement levels if they are retested and bearish reversal patterns form.

If the opposite scenario plays out where oil inventory data shows an increase of supply and/or Canadian inflation comes in below expectations, I may still consider the short position, but I’ll have to see how far off the numbers are from expectations / previous reads.

That’s it for now…so what do you all think? Are you watching NZD/CAD for a potential trade? If so, what’s your directional bias and entry strategy? Let me know in the comments section below!

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