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Short-term trading idea FX NXDCAD – bear speculation: drop to the TR trend line

Trading opportunities on the currency pair: On the back of a revision of New Zealand’s GDP forecast, the upcoming parliamentary elections (23rd of September), and a rise in oil quotes, the Kiwi dollar is expected to fall against its Canadian counterpart to 0.8893, or as far as 0.8645 if we see some aggressive selling.

Background:

The last idea on the NZDCAD pair came out on the 12th of December, 2016. At the time of publication, the Kiwi dollar was trading at 0.9354 against the loonie. A drop to the intermediate support of 0.9309 was expected after a rise in oil quotes, with a further drop to 0.9122 expected by the middle of January. Within the first week, the price hit 0.9309. Then, after some volatile fluctuations in oil prices, 0.9122 was only reached by sellers in August.

Current situation:

The New Zealand dollar was an outlier among the major currencies last week. The NZDCAD pair fell by 2.15% to 0.9006. This drop gathered pace as the 0.9205 support was broken through following a revision by the NZ government of their economic growth forecast for 2017/18. In addition to this, the Kiwi dollar is under pressure from most of the majors due to the upcoming parliamentary elections to be held on the 23rd of September.

Brent oil prices could potentially rise to 54.21/50 USD. Accounting for all the negatives surrounding the New Zealand dollar as well as the potential for growth in oil prices, I can see the NZDCAD pair falling as far as 0.8893. The price might not break through the TR trend line straight away.

On Monday, oil is up 0.43% after the news that two oil fields in Libya have stopped output after being taken over by an armed group.

Fig 1. NDZCAD weekly chart.


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