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Short-term Trading Idea: FX NZDCAD – Bear Speculation: Expanding on Idea from 20th April

Trading opportunities on currency pair: The driver of the Canadian is still oil. An interim trend line from a 0.8728 minimum has been broken. The road is open to the next line: 0.9018. This scenario for a fall will be cancelled out by the pair closing higher than 0.9365.

Today I’ve decided to make an appendix to my idea from 20th April. Last Monday I expected a rebound of the rate to 0.9460 with a fall to 0.9018 following it. The NZD/CAD rate jumped to 0.9456 and fell to 0.9151 (-305 points). Sales of the New Zealand dollar were aided by two factors: John McDermott’s comments and the growth in the price of oil.

On Thursday (23rd April) the NZD/CAD rate dropped from 0.9377 to 0.9197 (-180 points). Sales of the New Zealand dollar began after the Reserve Bank of New Zealand’s John McDermott announced that the central bank is not looking to raise rates at the moment and that their monetary policy should remain stimulative for an extended period of time.

A barrel of Brent is trading at 65.28 dollars. Brent oil hit 65.80 dollars for the first time since December last year. Support for oil quotes came from the situation that flared up in Yemen and also the reduction in shale mining in the US. The coalition headed by Saudi Arabia has resumed its airstrikes in Yemen.

According to data from the American oil and gas company, Baker Hughes, the number of extraction rigs (gas and oil) in the week ending 24th April, fell by 22, to 932. That’s 929 less than a year ago. The number of US rigs for oil alone fell by 31 to 703.

I’d like to remind you that the Canadian dollar received support last week. On 15th April after the Bank of Canada had convened, S. Poloz didn’t mention at a press conference whether rates would be reduced. The central bank also increased its growth forecast for Q2 from 1.5% to 1.8% and its forecast for Q3 from 2.0% to 2.8%. Traders took this as a signal to buy Canadian.

On Friday the pair saw a jump before the weekend. After renewing its minimum, the NZD/CAD recovered to 0.9250. Investors are nervous about the US Fed’s meeting and also that of the RBNZ on 29th and 30th April. On these days figures for GDP will be released.

Oil is still the driver for the Canadian. The current 24-day correlation between the Canadian dollar and Brent oil stands at 0.93, whilst the 24-hour correlation has dropped to 0.15.

The daily candle closed with a hammer. After such a candle a correction could strengthen to 0.9307. A bounce happened from the limit which formed at 11th March’s minimum (0.9173). The hammer is a bull signal, but today is Monday so anything can happen. The trend is broken. The road is open to the trend line at 0.9018.

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