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NZD/CAD Trade Idea


Guest ChrisW

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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.

 

NZDCAD.jpg

 

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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. 

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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. 

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