Rally in NZD/CAD Pair Expected after Loonie Signals Downtrend on Weak Crude

Canadian DollarThe currency pair NZD/CAD has been in steady decline since the starting of July this year. The main reason for the decrease in the New Zealand Dollar is because of downwardly revised growth outlook and drop in dairy products average price in July auctions.

For Loonie, the rate hike and the hawkish stance of the Bank of Canada have contributed in the uptrend. After losing approximately 600 pips to close at 0.90070 earlier this week, the currency pair NZD/CAD has started showing some signs to reverse the trend.

Based on the arguments mentioned below, we believe the currency cross to start an uptrend.

The Canadian Dollar rally and a rate hike in July seem to have an adverse effect on the economy. It is quite clear from the decline in the reading of RMPI or Raw Material Price Index and IPPI or Industrial Product Price Index.

There was a 0.6% decline in RMPI reading on M-O-M basis while IPPI reading fell by 1.5%. The analysts had speculated the IPPI and RMPI reading to decline by 0.7% and 0.2% respectively. In June, the IPPI and RMPI reading dipped low by 1.1% and 3.6% respectively. It is to be noted that decline in IPPI in July has been regarded as the lowest since December 2014.

The hurricane Harvey has forced US refineries to shut down. This, in turn, has led to lower than required demand for crude oil. The refineries would need a few weeks of purchasing crude oil at the original price. For the time being, it is likely that the crude oil will remain bearish. Hence, the Canadian Dollar is likely to turn weak in the coming time, and the reason responsible would be the bearish outlook for crude oil and weak economic data.

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As far as Kiwi Dollar is concerned, the trade balance contrary to expectations is swinging to N$85 million surpluses in July as compared to a deficit of N$351 million during the same time last in 2016. Analysts are speculating a deficit of N$200 million. The exports volume increase had more than offset the slight dip in dairy products average price.

It is to be noted that unemployment rate in New Zealand declined to a nine-year low of 4.8% in 2017 second quarter as compared to 4.9% in last quarter thereby matching the expectations of the analysts. This in turn fundamentally favours the rally in currency pair NZD/CAD.

If we look at the price chart, it shows support for the currency pair at 0.9030. The stochastic indicator too is making new highs. NZD/CAD has formed a bullish crossover above 32-period moving average. Hence, we can quickly expect the NZD/CAD currency pair to rise in a firm manner.

NZDCAD Pair August 31st 2017

NZDCAD Pair August 31st, 2017

To take profits based on the analysis mentioned above, it is recommended to opt for a long near 0.9080 and place stop order below 0.8960. If the speculation turns out to be true, one would be able to book profits near 0.9220.

Traders are also recommended to invest their money in a call option and set the expiry date of September 9th. It would be wise to purchase the option from a recommended binary options broker while the NZD/CAD currency pair is trading near 0.9080 in OTC market.

Rich Archer

Rich Archer

Hi, my name is Rich Archer. I am living in London. Welcome to Binary Manual. Reach to Binary Options broker reviews and market news here.

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