The New Zealand dollar had a very tough week last week, as concerns about growth in China, weaker-than-expected mid-level domestic data and general risk aversion highlighted the relative weakness of the commodity-linked currency in the foreign exchange space.
Meanwhile, the Bank of Canada’s willingness to explore deeper rate cuts is not helping the CAD bulls’ hopes. In fact, the oil-linked Canadian dollar failed to benefit from the recovery in crude prices last week.
This is likely why the NZD/CAD pair, which has been making lower highs and lows since hitting resistance at 0.8475, has bounced off lows at 0.8315 to retest the psychological level at 0.8400.
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NZD/CAD currency pair for 1 hour Chart by TradingView
Will the NZD/CAD pair continue its downtrend this week?
our Event Guide to Canada’s CPI Report Expectations are that we may see an easing in Canadian consumer price pressures in August. This supports the dovish Bank of Canada speculation and is likely to weigh on the Canadian dollar.
USD/CAD bullish trend This is a good setting to monitor in case of a net negative CAD reaction.
But if the CPI reports reflect higher price pressures, the Canadian dollar may recover some of its losses.
The New Zealand dollar, which showed early weakness following disappointing Chinese data over the weekend, may continue its downward trend against the Canadian dollar.
We are looking for bearish candles around the psychological handle .8400 near the R1 pivot point line (.8409) and the descending channel resistance.
Rejection and continued trading below the .8400 level opens the way for the pair to retest its previous lows at the .8320 level.
Should the NZD rally on Monday gain momentum ahead of the Canadian CPI report, we could also look to a move to the 0.8425 turning point before the NZD bears take control of the NZD/CAD price action.
Whichever way you choose to trade this setup, make sure you use the best risk management plans and monitor the rest of the top notch triggers so you don’t miss out on entry and exit opportunities!
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