NZDCAD continues to remain my key pair for the week ahead

Catching up to past week’s economic events, one key pair remains in my sight for the week ahead.

In a surprising move, the Bank of Canada has run up another interest rate hike setting the rate to 1.25%. Unexpected solid economic numbers has been the main cause for this hike. This move is in-line with November’s inflation rate release to a surprising 2.1%. This is on par with the central bank’s target.

From the perspective of the charts, this rate hike was largely priced in given the whipsaw action with the Canadian dollar failing to close significantly higher. Of course, NAFTA’s renegotiation is also expected to contribute to the Canadian dollar’s volatility.

USDCADH1.png
USDCAD 1-Hour

Taking a look at the hourly chart, we can see that the Canadian dollar rallied and then sold off following the announcement thus indicating a lack of significant surprise towards this rate hike.

This rate hike is also expected to trickle down into higher mortgage rates, but it isn’t expected to curb the rising housing prices. This could play as a major factor in December’s inflation rate release. The Bank of Canada could potentially raise rates once again to the 1.5% mark, which remains unlikely at this point.

Speaking more about the pair in question, I believe NZDCAD has been heavily sold off and we completed the first wave of an accumulation.

NZDCADDaily
NZDCAD 1-Day

Nearly two weeks ago, we’ve seen the spike up. I actually closed out my trade on a Friday and re-entered recently. Price is currently stalling right now, which is to be expected as it signals a pause after such a big rally upwards. The kiwi is expected to continue recovering from the election aftermath.

Since December 2017, the NZDUSD pair made tremendous gains and i expect NZDCAD to follow suit. I’m not going to post the image now, but courtesy of Mataf.net, the daily correlation between the NZDCAD and NZDUSD is 86.4% correlated. This implies a rather strong positive correlation so I expect NZDCAD will also experience this rally.

I currently do not have any other pairs monitored for significant trades. Stay tuned for updates!

 

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