NZDCAD Looking To Break Lower
NZDCAD has been moving in a broad bearish channel over the last year and price is now threatening to take another leg lower. NZD has been among the currencies hardest hit by the recent fall-back in risk appetite. Hawkish Fed expectations, fuelled by the December FOMC minutes last week, have spooked risk markets here. Despite a mixed jobs report on Friday, the market is widely expecting the Fed to lift rates in March.
CAD on the other hand, has been faring a little better as a result of the rebound higher in oil prices. Additionally, with economic data continuing to reflect a strong upward trajectory, and the BOC among the more hawkish of the G10 central banks, the current divergence between NZD and CAD looks set to continue. This is echoed by data showing that the retail market is more than 90% long the pair, suggesting scope for further downside. Bears can stay short the pair below .8553 looking for a continuation towards .8475 initially and the channel low thereafter (mid .83s).
Keep An Eye On
US CPI on Tuesday will be the key data to watch. A strong reading will refocus the market’s hawkish Fed expectations (following a mixed NFP). In this scenario, a stronger USD will hurt NZD more than CAD, allowing the current downtrend to continue lower. The broader risk backdrop is also key here. While equities remain under pressure, NZD is likely to remain subdued near term. However, any shift in this backdrop will likely fuel short-covering in NZD.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.