NZD/CAD has shed nearly 10% over the past 6-months, and its bearish trend structure suggests bears are preparing to push it lower still. Moreover, the yield differentials for NZD-CAD 2-year has broken to new lows which suggests further downside pressure for the commodity FX cross. Of course, this is helped by the fact that BOC’s base rate is 1.75% versus RBNZ’s 1%, providing greater demand for Canadian dollar (relative to NZD) from yield hungry investors. And Canada’s economic data continues to outperform expectations at a greater pace, relative to New Zealand’s.
A wider bearish channel remains intact on the daily chart and, whilst his could allow for a deeper correction in due course, we suspect it’s preparing for another leg lower. Prices have retraced from their lows yet stalled around a cluster of resistance below 0.8500, which comprises of the February low, a 38.2% Fibonacci level and of course the round number (and our original long-term bearish target) 0.8500.
Given the strength of the decline, it appears more likely the retracement is close to completion.
On the four-hour chart, prices have tested a correction line, a break of which could confirm the resumption of the daily downtrend. RSI has also broken through its prior swing low to suggest bearish momentum is building on this timeframe.A break back above 0.8500 invalidate the near-term bearish bias and increases the potential for a deeper correction within the wider, bearish channel.Whilst 0.8500 caps as resistance, the bias is for a re-test of the 0.83500 area and potential to extend its decline within the bearish channel and head for the 2018 low.
NZD/CAD Teases Bears With A Swing-Trade Short
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