Overly, Canadian dollar weakness started on Friday and what a day it was for holders of commodity currencies especially on the NZDCAD exchanges. The quick cash and positive swap is the much needed extras. The NZD and AUD were quick to capitalize on that weakness and dragged themselves out of the yearly lows registered over the past 3 months or so. I will reiterate that Lonnie weakness is expected to continue and this is not just a fundamental consideration. Fundamentally we have BoC officials scaling back on foreign securities purchase to a mere C$ 9.85 down from an upgraded July’s figure of C$23.97. Further weakness fuelled by technical developments saw a NZD rally on Friday.
Coupled by weak US Consumer Price Index and retail sales data, the USD tumbled briefly as concerns were raised about the strength of the economy and the previously under estimated deflationary pressures. Investors were particularly worried about the chances of a further rate hike by the Feds. Well, some positive Forex news and reassurance came from Yellen on Sunday when she said that despite the weakness in price pressures, the labor conditions were robust enough to allow a slow but gradual pace of tightening. Of course this was fodder for the USD bulls and the markets opened higher today.
Technically, there is a buy signal showing sustained bullish momentum which is buoying prices. As we can see, there was a double bar reversal pattern at the oversold territory and confirmed by a buy stochastics signal. Thereafter, prices managed to trend higher, retraced back to support trend line and continued higher. What is important now is if that resistance trend line will be broken. I’m bullishly skewed and I will look to enter long especially if there is a break out above this weekly resistance trend line and a consequent retest of that level. Immediate profit taking zone will be that support turned resistance trend line extrapolated into the future at around 0.93.
I will therefore trade as follows:
Buy: Limit: 0.89-0.8970
Take Profit: 0.93
Stop Loss: 0.885
Have a good trading day