NZD/CAD Rally Should Stop Near 0.8850

NZD/CAD Rally Should Stop Near 0.8850

NZD/CAD Rally Should Stop Near 0.8850

NZD/CAD has been on a tear. NZD’s strength comes from U.S. dollar weakness, short covering, improvement in risk appetite and this week’s better than expected PPI report. CAD’s weakness has been caused by softer data and low oil prices. However on a fundamental basis, the rally in NZD/CAD should be short-lived because the recent decline in dairy prices is negative for New Zealand’s economy and will eventually catch up to the currency. Canada is plagued by weaker retail sales but the primary driver of the currency is oil and based on the recent price action, $40 a barrel is proving to be a very important support level.

Technically the most important resistance level for NZD/CAD is where the 200-day SMA and 23.6% Fibonacci retracement 2009 to 2014 rally converge near 0.8850. Support is the 100-day SMA at 0.8592.

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