NZD/CAD Trade Idea

[Guest ChrisW]

There's been interest in shorting NZD/CAD, especially in the wake of last night’s poor Kiwi dairy auction. I would be looking at short positions, placing a stop above yesterday’s high of c$0.89 and adding on a break of the September uptrend.

 

This is quite aggressive and while we have seen a bearish reversal (circled), we still need to see a lower low to confirm the reversal. The momentum oscillators are rolling over, but not giving any huge sell signal so I would keep position sizing small.

 

 From a relative valuation perspective, spot NZD/CAD has diverged significantly from the NZ/CAD 2-year bond spread. As the yield spread premium the NZ 2-yr treasury commands over the Canadian 2-yr declines the pair should follow, but this has not been the case. I suspect we are going to see catch up from spot FX and NZD/CAD should come back in-line as mean reversion kicks in.

 

 On the CAD side my personal belief is an extra c$10b in fiscal spend announced by the new Canadian Liberal government is not going to dramatically alter the BoC’s thinking too greatly! Keep in mind the BoC meet tonight.

 

 

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[Guest ChrisW]

Fonterra downgrade seemingly helping the idea along..good NZD selling...watching for the trend break

[jbtrader]

Thanks Chris.

 

Really appreciate the trading idea :-)

[Guest Zero]

Wondering how this trade is going?  I looked at the chart but can't correlate what I see to the one Chris posted (timescale)?

 

It seemed (for the NZDCAD) there was a bit of action - rose a bit then down sharply as suggested, bit of a dance down at those levels and then?

 

Is there an exit point, or ride it out for a few days, or till a Fib level/support?? 

 

Nice trade regardless. 

[jbtrader]

This trade just didnt work out.

The stop was hit as the price hit new highs for the week last night.

Strength in the Kiwi was dramatic.

 

Better luck next time.

[Guest Zero]

Thanks

 

I had a look today and can see that surge now.  Thanks to Mario...

I think there might have been a few good points in it anyway pre-ECB.

 

I haven't traded FX for 10years - but the memories of similar moves at midnight (for me) are still pretty clear.  I keep meaning to consider binaries and FX, but am busy enough at the moment.