Technicals & fundamental that drive NZD/CAD and trade tips

FX:NZDCAD   New Zealand Dollar/Canadian Dollar
103 0 7
NZD/CAD bulls spike above DMAs, RBNZ hinders momentum while crude price weighs on CAD depreciation – “Cash-or-nothing binaries” to trade:

After the pair jumps above 7 & 21DMAs, the current prices gained intensified buying momentum, 7DMA crosses-over 21DMA. For now, even though the more upswings seem more likely as prices spiked above DMAs, whether it is sustainable is the biggest puzzle.

The RBNZ is scheduled today to deliver monetary policy changes as the central bank made it clear last month that it would be returning to the easing table, and like the consensus, we expect a 25bp OCR cut to 2.0% this week – an all-time low.

As early as March the central bank had cut rates due to the strong NZD. And only last month it pointed out that the kiwi is still trading approx. 6% stronger on a trade-weighted basis than it had assumed in its projections. Based on these projections the RBNZ even expects NZD to depreciate by an impressive 8% by year end.

Major resistance is now seen at 0.9517.  Earlier, the pair has bounced above EMAs as well on the monthly graph, to drag towards recent highs of 0.9552 levels (near upper BB, see monthly chart), began testing resistance at that level and dropped to currently trade around 0.9436 levels. 

No wonder even if you see the short term  bearish trend for next strong support at around 0.9307 levels but since the leading indicators are clearly converging to the on-going rallies that confirm the momentum in buying.

On a broader perspective, we also spotted out the triple top formation on monthly charts (see dotted lines), but it puzzles with the non-directional trend with reducing volumes on rising prices. 

As we’ve seen a double whammy to the Canadian dollar             in the recent past. From last couple weeks crude losing momentum in its recovery (dropped from the highs of $50 to below $40 levels), while the Canadian employment claims also disappointed – as did the trade balance. As a result, CAD began easing; As long as the oil             price does not recover on a sustainable basis it has nothing to oppose USD on a fundamental basis at present.

On the lower side, upon the break below 0.9307 we see more southward targets up to 0.9210. 

Trade tips:

Well, on intraday terms, the trade strategy would be the boundary binary options by using cash-or-nothing options for targets around 40-50 pips.

Upper strikes – 0.9485; lower strikes around 40 pips below 0.9397 levels (i.e. 7DMA).

The trading between these strikes likely to derive certain yields in this puzzling trend and more importantly these yields are exponential from spot FX.

For cash or nothing, these options would be exercised if the forward prices to remain between both strikes (i.e. 0.9485 > Fwd             price > 0.9397).
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