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The NZDCAD has broken below a key level at 0.9450. It’s one area I pointed out in last Thursday’s commentary as the pair was approaching a confluence of resistance at 0.9550.
Despite reaching a high of 0.9517 last week, buyers were unable to force a retest of the 0.9550 handle. That said, there’s a chance that the trend line from the 2016 high could be a bit lower. If so, today’s reversal could be the start of something more significant.
As long as 0.9450 holds as new resistance on a daily closing basis (New York 5 pm EST), the pair is at risk of further losses. Key support from here comes in at 0.9320/5 followed by the 0.9200 area.
Similar to the USDCAD that we reviewed the other day, there is also a 4-hour ascending channel that’s worth watching. In fact, channel support came under fire as I was typing this and appears to have broken down.
This formation gives us some options. We can either watch for a selling opportunity on a retest of 0.9450 as new resistance or trade this recent break below 4-hour channel support.
As always, the final decision is yours. It comes down to whether or not you’re convinced by the 4-hour channel break shown below. Just know that the event calendar suggests a prudent approach over the next 24 hours and then some.
On Wednesday at 4 pm EST, we have an RBNZ rate decision and statement. The event is sure to shake things up for the New Zealand dollar, particularly given the relatively light trading volume in the final hour of the session.
Regardless of how you approach this, keeping a low risk profile this week is a good idea. And if you miss an initial entry at current levels, don’t chase. If this is a significant turning point, a move to 0.8860 over the coming weeks wouldn’t surprise me.
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