The NZDCAD has been trending lower since putting in a top last December.
That 0.8800 swing high was the result of the November 19th breakout from channel resistance.
It turned out to be an excellent long trade for us, but now shorts are having their time in the sun.
As you can see from the chart below, NZDCAD is resting on a key level that, if broken, could expose lower levels.
The 0.8500 handle has served as a pivot for the pair since last August.
In fact, 0.8500 was the support region that triggered the NZDCAD breakout that materialized late last year.
You can also see how 0.8500 attracted buyers last week.
That means a daily close below the area would open the door to lower levels, including 0.8360.
We could even see another run at the 2019 low at 0.8240.
A bearish stance on a Canadian dollar cross shouldn’t come as a surprise, either.
On February 7th, I wrote about a GBPCAD rising broadening wedge, which hints at exhaustion from buyers.
I also discussed the potential for a CADJPY bullish reversal last week and again in the latest Weekly Forex Forecast.
With that in mind, I like the idea of a lower NZDCAD.
But as I mentioned above, it’s going to take a daily close below 0.8500 to expose the next key support at 0.8360.
Keep in mind too that a pair like NZDCAD can sometimes “overshoot” key levels.
Look no further than the February 4th retest of 0.8600 as new resistance that actually closed the day above that level but then sold off.
That means a wider stop may be necessary with NZDCAD, or any Canadian dollar cross, in my opinion.
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