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NZD/CAD. Down again or still up?

Jul 24 2019, 02:31 PM (+06) |

Last time we focused on the NZD/CAD pair a month ago. We succeeded in forecasting its further price movements–the target of 0,88000 was reached. Let’s follow fundamental factors and after that get to the technical features.

GDP Q1 in New Zealand, which was published on June 19 has met the economists’ expectations (+0,6%). The annual growth was released at the level of +2,7%.

Picture 1. NZ gross domestic product

As we can see, the year-over-year economy growth has been slowing down since June 2018. Though we wrote yesterday that the national economy strongly depends on agricultural sector and especially on the price of milk, it will definitely take time to improve the situation. The lag between monetary stimulation and the real influence on financial growth could be quite significant.

The inflation in Canada, which we had mentioned in our previous review, increased. Core CPI in May (YoY) was much better than the forecast (+2,1%).

Unfortunately for the ‘mid-term bulls’, these statistics almost didn’t help the CAD to beat the New Zealand national currency. NZD/CAD was weakening almost all July and now reached its crucial level. Fundamentally, this week we are going to deal only with the NZ trade balance, which we discussed in our review yesterday.

Technical features

The NZD reversed after reaching the 38,2% Fibo correction level. The 200-EMA was reached as well. We expect that the moving average would be considered as a dynamic resistance line. Technically, two things happened since our last review: the double bottom appeared (the first low of June 21 and the second bottom appeared on July 10) target was reached and the gap down was closed on July 10.

There are two options now:

  • for bulls: to break 0,88757 and move further towards 0,89532.
  • for bears: to break 0,88000 down and return back to 0,87000.

Both options are possible.

Summary: wait until a breakout and buy/sell, considering the targets we have mentioned.

Picture 2. NZD/CAD. 1D TF

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