NZDCAD isn’t a pair I trade often. It tends to move in quick bursts followed by tight consolidation, which doesn’t conform to my preferred style of trading.
However, the pair recently made a sharp move lower that put it below a level of interest on a weekly closing basis. Also, the recent price action from the New Zealand dollar suggests the currency may continue to weaken as we head into the new year.
The trend line that extends from the August low at 0.9275 outlines what appears to be a topping pattern of sorts. We can’t technically call it a head and shoulders as the right shoulder never finished developing, but the sharp reversal in November does paint a relatively bearish picture.
From here I’ll be watching for a selling opportunity on a retest of the 0.9340 area as new resistance. This region is what triggered last Thursday’s late-session profit taking that led to a 40 pip just drop hours before the close.
With that said, I’m in no hurry to put capital at risk. The holiday season has the markets half asleep, and that usually doesn’t change until the new year begins.
But if the NZDCAD stays true to form, we may see an extended period of consolidation following last week’s 230 pip selloff. With this in mind, waiting on the sidelines seems appropriate regardless of seasonal effects.
A move lower would likely encounter support at the previous week’s low of 0.9225, but my final target is the July low at 0.9080.
Alternatively, a daily close back above the trend line would negate the bearish bias.
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