NZD/CAD: Breakdown Pressures are Expanding - 30 December 2019

Ibeth Rivero

Bearish momentum is accumulating after this currency pair pushed into its resistance zone on the back of the low volume. The New Zealand and Canadian Dollars are both considered commodity currencies, where the former is more active in the soft commodity market and the latter in hard commodities. Global growth concerns have a bigger impact on hard commodities, which assisted the advance in the NZD/CAD. With breakdown pressures on the rise, a short-term corrective phase may emerge before a renewed push to the upside. You can learn more about a breakdown here.

The Force Index, a next-generation technical indicator, shows the formation of a negative divergence as bearish momentum is expanding while the NZD/CAD extended its advance. After the descending resistance level rejected the Force Index, it converted its horizontal support level into resistance. This technical indicator remains in positive conditions but is closing in on its ascending support level, as marked by the green rectangle. A breakdown is favored to take the Force Index into negative conditions and place bears in control of price action.

Price action moved below its Fibonacci Retracement Fan trendline, adding to bearish developments in this currency pair. The NZD/CAD is anticipated to complete a breakdown below its resistance zone located between 0.87355 and 0.87805, as marked by the red rectangle. This is likely to lead to a profit-taking sell-off that will close the gap to its ascending 38.2 Fibonacci Retracement Fan Support Level. A move below the intra-day low 0.87002 is favored to result in new net short positions. You can read more about the Fibonacci Retracement Fan here.

Given the long-term fundamental outlook of soft commodities versus hard commodities, the long-term uptrend in this currency pair is likely to remain intact. Price action is anticipated to extend its breakdown into the next short-term support zone located between 0.85669 and 0.86131, as marked by the grey rectangle. The 50.0 Fibonacci Retracement Fan Support Level is on the verge of crossing above this zone, with the 61.8 Fibonacci Retracement Fan Support Level enforcing the bottom range of it. A breakdown in the NZD/CAD below its support zone would require a fresh fundamental catalyst.

NZD/CAD Technical Trading Set-Up - Breakdown Scenario

  • Short Entry @ 0.87700

  • Take Profit @ 0.86100

  • Stop Loss @ 0.88100

  • Downside Potential: 160 pips

  • Upside Risk: 40 pips

  • Risk/Reward Ratio: 4.00

A breakout in the Force Index above its descending resistance level could pressure the NZD/CAD into a breakout attempt. While the long-term outlook favors more upside, the technical conditions point towards a breakdown. Should this currency pair sustained a breakout, the next resistance zone is located between 0.88545 and 0.88880. More upside would depend on a change in short-term fundamental developments.

NZD/CAD Technical Trading Set-Up - Breakout Scenario

  • Long Entry @ 0.88250

  • Take Profit @ 0.88850

  • Stop Loss @ 0.88000

  • Upside Potential: 60 pips

  • Downside Risk: 25 pips

  • Risk/Reward Ratio: 2.40

NZDCAD

About the Author
Ibeth Rivero

Ibeth contributes daily market commentary in both English and Spanish (both of which she speaks fluently) and she also manages the DailyForex mobile app to ensure that traders around the world are getting important market updates in real time.

Currency Pairs:
Comments

Did you like what you read? Let us know what you think!

exclamation mark

Please make sure your comments are appropriate and that they do not promote services or products, political parties, campaign material or ballot propositions. Comments that contain abusive, vulgar, offensive, threatening or harassing language, or personal attacks of any kind will be deleted. Comments including inappropriate will also be removed.

0 User comments
Add Comment

exclamation mark

Please make sure your comments are appropriate and that they do not promote services or products, political parties, campaign material or ballot propositions. Comments that contain abusive, vulgar, offensive, threatening or harassing language, or personal attacks of any kind will be deleted. Comments including inappropriate will also be removed.

Read more
Add new comment
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.