Technical Analysis USD/CAD : 2019-04-24

Preparing for the meeting of the Bank of Canada and publication of New Zealand data

In this review, we would like to draw your attention to the New Zealand dollar vs Canadian dollar currency pair. Is there a possibility for the NZDCAD to fall?

Such dynamics are observed in case of the strengthening of the Canadian dollar and weakening of the New Zealand dollar. The next meeting of the Bank of Canada will be held on Wednesday, April 24. Most market participants believe that its rate will remain at the current level of 1.75% until 2020. In the future, it can be raised to 2%. The probability of a recession in Canada during the next 12 months is estimated at 20%, and during 2 years - at 27.5%. This is better than indicators of the US, where the probability of a recession during a year is estimated at 25% and within 2 years - at 40%. An additional factor for the strengthening of the Canadian dollar may be an increase in world oil prices amid the US desire to tighten the implementation of sanctions against Iran and stop its oil exports. The Reserve Bank of New Zealand may cut the rate at the next meeting on May 8, 2019. The probability of this is estimated at 43%. Inflation in New Zealand is 1.5% and the rate is 1.75%. The trade balance for March will be released on April 26, which may affect the New Zealand dollar exchange rate. Let us note that the New Zealand trade balance year over year has been negative since October 2014, while in Canada it is generally positive.

On the daily timeframe, NZDCAD: D1 has approached the lower boundary of the medium-term neutral range for the 5th time. Before opening a sell position, the NZDCAD should breach it down, as well as the 200-day moving average line. Most technical analysis indicators formed sell signals. The price decrease is possible in case of a slowdown in the New Zealand economy and the strengthening of the Canadian economy.

• The Parabolic Indicator gives a bearish signal

• The Bollinger bands have widened, which indicates high volatility. Both bands are titled down

• The RSI indicator is below 50. No divergence

• The MACD indicator gives a bearish signal

The bearish momentum may develop in case NZDCAD falls below the 200-day moving average line at 0.888.This level may serve as an entry point. The initial stop loss may be placed above the two last fractal highs, the Parabolic signal and the middle of the mid-term neutral range at 0.909. After opening the pending order, we shall move the stop to the next fractal high following the Bollinger and Parabolic signals. Thus, we are changing the potential profit/loss to the breakeven point. More risk-averse traders may switch to the 4-hour chart after the trade and place there a stop loss moving it in the direction of the trade. If the price meets the stop level (0.909) without reaching the order (0.888), we recommend to close the position: the market sustains internal changes that were not taken into account.

 

Summary of technical analysis

Position	Sell
Sell stop	Below 0.888
Stop loss	Above 0.909

 

 

 

 

 

 

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