The NZD/CAD pair broke higher during the course of the day on Monday, breaking back above the 0.85 handle. Because of this, it looks like we are continuing to bounce around in this consolidation area, which I see as existing between the 0.84 level, and the 0.86 level, with the 0.85 level being the epicenter. In other words, the 0.85 level is “fair value.”
The Canadian dollar does look a bit soft, but quite frankly it should continue to do better than the New Zealand dollar. After all, the market will continue to favor lower commodity prices, and while the crude oil markets will certainly work against the value the Canadian dollar, the truth of the matter is that the New Zealand dollar is much more sensitive to the overall attitude of risk appetite around the world. With that, it makes sense that this pair continues to be fairly soft, although you are essentially talking about 2 lightweights fighting it out here.
If we can break down below the bottom of the channel that I have drawn on the chart, I believe that the market will continue much lower. I think it also coincides very nicely with the 0.65 handle in the NZD/USD pair, and as a result I think that if we can break down below the 0.65 level over there, it’s probably time to start selling this market as well.
Selling rallies
In the short-term, I’m selling short-term rallies out as its market most certainly has quite a bit of bearish pressure. Things of course would change if the oil markets collapsed, but at this point in time I simply have to go with the trend as the New Zealand dollar is so soft in general, and with that I would anticipate that the market will continue going forward to the downside in this market as consolidation typically will end up being continuation of the previous trend. However, if we broke above the 0.87 level, I might be interested in going long. Until then, I will only sell this pair.
