Trade Recommendation: NZD/CAD

The New Zealand Dollar/Canadian Dollar (NZD/CAD) pair launched its bull run in September 2012. This is when it took out resistance of 0.80. The price action triggered the large inverse head and shoulders reversal pattern on the monthly chart. This catapulted the pair to as high as 0.96534 in March 2014. In less than two years, the New Zealand Dollar grew by over 20% against the Canadian Dollar.  

As the target of the inverse head and shoulders pattern was hit, trend followers and breakout traders started to take profits. The increased selling activity forced the market to drop to 0.82889 in September 2015 before bulls stepped in to bottom fish.

The higher low inspired a rally that sent the market to as high as 0.99225 in November 2016. Unfortunately for buyers at this level, bears managed to reclaim 0.96 resistance and send the market tumbling down to 0.86385 in November 2017. However, the market appears to have created another higher low, which opened an opportunity to generate a profitable trade.    

Technical analysis show that the New Zealand Dollar/Canadian Dollar pair is creating an ascending triangle pattern on the monthly chart with a breakout point at 0.96. The recent higher low it created puts the pair in a good position to take out the resistance. Even though bears are working hard to defend 0.96, breakout is inevitable as long as the pair respects the trend line.

The strategy is to buy as close to 0.90 as possible. If NZD/CAD stays above the 0.90 support from hereon, it has the momentum it needs to take out 0.96 and move to our target of 1.09.

The process may take a year.

Monthly Chart of NZD/CAD

As of this writing, the NZD/CAD pair is trading at 0.90764 on Forex.com.

Summary of Strategy

Buy: As close to 0.90 as possible.

Target: 1.09

Stop: 0.885

 

Featured image courtesy of Shutterstock.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.