The NZD/CAD pair bounced during the session on Thursday, using the 0.87 level as support. However, we have only bounced back to test the bottom of the uptrend line that was broken during the Wednesday session. Because of this, the market looks as if the sellers could come back in and push the market lower in this general vicinity. At roughly 0.88, it looks as if the market could find enough selling pressure to turn things back around and continue with the longer-term downtrend.
I would look to short-term charts in order to start selling again, and I believe that we will eventually test the 0.86 level below, and even lower than that given enough time. Remember, the Royal Bank of New Zealand continues to want a lower valued Kiwi dollar, and has even suggested that fair value against the US dollar is 0.68 in their opinion. Keep in mind that we are comparing the Kiwi dollar against the Canadian dollar, which of course is a North American currency. Think of this as “Pacific” versus North America. There is much more investment in North America than Asia or the Pacific at the moment, so quite frankly makes sense of this pair continues to drop.
Following the trend
Regardless, I have no interest in trying to buy this market because of the fact that the downtrend has been so strong. I certainly don’t feel the need to fight with the Royal Bank of New Zealand, as it will almost certainly get its wish given enough time. Remember, they have recently intervened in the Forex markets and sold off the New Zealand dollar, and nobody knows if the plan on doing that again. That will of course puts some pressure on the New Zealand dollar under all circumstances as traders get very nervous about such things.
I believe that ultimately we will search out the 0.85 level, as it is the most significant large, round, psychologically significant number below. It’s probably only a matter of time, but you could see a bit of volatility going forward.
