As market participants continue to prepare and position themselves up for the big central bank meetings on Wednesday, most of the attention is understandably going to be on the yen, dollar, gold and stock markets.
However, this is not everyone’s cup of tea. Clearly some traders will want to avoid the drama altogether and concentrate on established trends that probably won’t be affected by the BoJ and/or Fed meetings. For FX traders, this means currency crosses like the EUR/GBP or GBP/CAD, for example.
But one particular FX pair that is catching my eye at the moment is actually the NZD/CAD, which admittedly may well be impacted by a central bank decision this week – one that will understandably be overshadowed by the BOJ and Fed: the Reserve Bank of New Zealand. The RBNZ, unlikely to make any changes to interest rates, will be releasing its policy statement three hours after the FOMC publishes its own statement on Wednesday evening.
Recently, the RBNZ dropped its dovish bias and turned neutral as it strongly suggested that it may be unable to cut interest rates again for some time. This has helped to underpin the New Zealand dollar across the board.
Meanwhile, concerns about oversupply and a stronger US dollar have been among the factors weighing on crude oil prices once again in recent times. With crude oil being Canada’s top export commodity, this has undermined the Canadian dollar.
Because of these fundamental factors, the NZD/CAD has managed to break out of a major consolidation pattern to the upside, above the 0.9550-0.9655 resistance area. If the NZD/CAD can sustain its gains above this zone then we could see significantly higher levels in the coming weeks and months.
A couple of near-term bullish targets include 0.9835-45 area (where two Fibonacci extension levels converge) and then parity (1.00). The point of origin of the breakout around 0.9650/55 area should be the new support to watch. An additional support area is seen around the 0.9550/80 area, below which our bias would then turn bearish.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. GAIN Capital Group, LLC is a registered Futures Commission Merchant and Retail Foreign Exchange Dealer with the Commodity Futures Trading Commission (CFTC)and is a member of the National Futures Association (NFA # 0339826) in the US, GAIN Capital UK Ltd is authorised and regulated by the Financial Conduct Authority (FCA) in the UK, GAIN Capital Australia Pty. Ltd is regulated by the Australian Securities and Investment Commission (ASIC) in Australia, and GAIN Capital Japan Co. Ltd is authorised and regulated by the Financial Services Agency (FSA) in Japan.