Overnight, RBNZ kept their OCR unchanged and surprisingly changed their previous bear tone.It appears that a strong Kiwi is not that bad for the economy. In their statement they noted that a weak NZD is turning out to be helpful and didn’t in anyway suggested proposals for further weakening as pointed out last time.
However after the statement, NZD temporarily depreciated before steadying in subsequent sessions as investors interpreted what policy makers had in mind. Going forward though, I expect Kiwi to trend north and this will largely depend on any good news from the eventual composition of the coalition government.
The CAD on the other hand is turning from their recent highs. In his statement, Governor Poloz appeared cautious of the rapidly appreciating CAD and stated that the BoC will be monitoring exchange rate movements going into the next meeting scheduled at October. Further, there were no indications of a further rate hike going into their next meeting therefore damping bullish expectations. In my opinion, I predict an uptrend in this currency pair and by extension other pairs with CAD as its quote in the coming days.
Earlier, I pointed out that CAD honeymoon is over and it is time for payback. Buying NZD or AUD means some positive swap rates. In the weekly chart, there is a clear buy signal and after last week confirmation, price opened lower when election results showed that a coalition government is needed this term. It was a hotly contested event and somehow investors had braced themselves before the weekend. So far, price is finding support and yesterday’s daily candlestick should point for Kiwi strength in the coming days.
In the 1hr chart, there is a buy signal and a chance to enter long with minimum risk. Since the weekly chart is strongly bullish and last week’s high remains intact, it will be prudent to enter long and place a stop loss below 0.8960 and aim for a 1:2 risk reward ratio above 0.94.
Trade as follows:
Stop Loss: Below 0.896
Take Profit: Above 0.94
Have a good trading day.