The prolonged weakness in the price of crude oil is keeping the Canadian dollar under pressure. During the past two weeks, the Canadian dollar lost against most of the G10 currencies. Interestingly, the New Zealand dollar, which is another commodity currency, is galloping against the Canadian dollar as well. The pair hit a high of 0.9757 last week. On the basis of the comments made by the Bank of Canada’s Governor Poloz about the Canadian economy and the employment data, we expect the NZDCAD pair to move up higher.
The latest employment report from Statistics Canada revealed that the economy added 54,000 jobs in May, up from 3,200 jobs in the previous month, and higher than analysts expectation of 11,500. However, the market did not react too positively to the news. The reason is the overall unemployment rate, which has climbed up by a notch to 6.6%, from 6.5% in the earlier month.
In a press conference conducted at the end of the Financial System Review, the Bank of Canada’s Governor Poloz expressed his concern about the rising debt levels and increasing imbalances in the housing sector. While pacifying the Canadians, the governor warned that the economy is still vulnerable to shocks.
In New Zealand, the average dairy prices increased marginally to $3,395 per ton in the dairy auction conducted last week. The GDT index rose 0.6%. Including this, the dairy prices have increased for the seventh time in succession. Commenting on the dairy prices, Federated Farmers dairy group chairman Andrew Hoggard stated that he expects the price to remain stable in the near future.
Thus, considering the cautious outlook of the BoC and the increase in the unemployment rate, we expect the Canadian dollar to remain weak against the New Zealand dollar.
The price chart indicates support for the NZDCAD pair at 0.9610. Both momentum and MACD indicator is making lower highs. That signifies the possibility of an uptrend. The next major resistance exists only at 0.9930. Thus, we expect the current uptrend to continue.
A long position in the NZDCAD pair would have a higher chance of success in the current situation. While going long near 0.9680, we would place a stop-loss order below 0.9580. The long position would be liquidated near 0.9930.
To increase returns from the forecast, we also wish to place a bet on the NZDCAD pair’s uptrend by purchasing a high or above option from a binary broker. We prefer June 20th as the option expiration date and a strike price of about 0.9680.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
