Technical Analysis
NZD/CAD
Preparing for the meeting of the Bank of Canada and publication of New Zealand data
In this review, we would like to draw your attention to the New Zealand dollar vs Canadian dollar currency pair. Is there a possibility for the NZD/CAD to fall?
Such dynamics are observed in case of the strengthening of the Canadian dollar and weakening of the New Zealand dollar. The next meeting of the Bank of Canada will be held on Wednesday, April 24. Most market participants believe that its rate will remain at the current level of 1.75% until 2020. In the future, it can be raised to 2%. The probability of a recession in Canada during the next 12 months is estimated at 20%, and during 2 years - at 27.5%. This is better than indicators of the US, where the probability of a recession during a year is estimated at 25% and within 2 years - at 40%. An additional factor for the strengthening of the Canadian dollar may be an increase in world oil prices amid the US desire to tighten the implementation of sanctions against Iran and stop its oil exports. The Reserve Bank of New Zealand may cut the rate at the next meeting on May 8, 2019. The probability of this is estimated at 43%. Inflation in New Zealand is 1.5% and the rate is 1.75%. The trade balance for March will be released on April 26, which may affect the New Zealand dollar exchange rate. Let us note that the New Zealand trade balance year over year has been negative since October 2014, while in Canada it is generally positive.
On the daily timeframe, NZD/CAD: D1 has approached the lower boundary of the medium-term neutral range for the 5th time. Before opening a sell position, the NZD/CAD should breach it down, as well as the 200-day moving average line. Most technical analysis indicators formed sell signals. The price decrease is possible in case of a slowdown in the New Zealand economy and the strengthening of the Canadian economy.
The Parabolic Indicator gives a bearish signal
The Bollinger bands have widened, which indicates high volatility. Both bands are titled down
The RSI indicator is below 50. No divergence
The MACD indicator gives a bearish signal
The bearish momentum may develop in case NZD/CAD falls below the 200-day moving average line at 0.888.This level may serve as an entry point. The initial stop loss may be placed above the two last fractal highs, the Parabolic signal and the middle of the mid-term neutral range at 0.909. After opening the pending order, we shall move the stop to the next fractal high following the Bollinger and Parabolic signals. Thus, we are changing the potential profit/loss to the breakeven point. More risk-averse traders may switch to the 4-hour chart after the trade and place there a stop loss moving it in the direction of the trade. If the price meets the stop level (0.909) without reaching the order (0.888), we recommend to close the position: the market sustains internal changes that were not taken into account.
Summary Of Technical Analysis
Position Sell
Sell stop Below 0.888
Stop loss Above 0.909
Market Overview
S&P 500 and NASDAQ close at record highs
Dollar Rises On New-Home Sales
US stock market closed solidly higher on Tuesday buoyed by upbeat quarterly results. The S&P 500 rose 0.9% to all time high 2933.68. Dow Jones industrial gained 0.6% to 26656.39 led by 2.3% rise in United Technologies (NYSE:UTX). The Nasdaq jumped 1.3% to 8120.82, record high. The dollar strengthening resumed as new home sales rose 4.5% over month in March when a decline was expected. The live dollar index data show the ICE (NYSE:ICE) US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, rose 0.3% to 97.59 and is higher currently. Futures on US stock indexes point to lower openings today.
FTSE 100 Outperforms European Indexes
European stocks ended higher on Tuesday after markets reopened following Easter holiday. EUR/USD joined GBP/USD’s slide and both are lower currently. The Stoxx Europe 600 added 0.2%, the eighth straight gain led by energy shares. The German DAX 30 edged up 0.1% to 12235.51, France’s CAC 40 gained 0.2%. UK’s FTSE 100 advanced 0.9% to 7523.07, a more than six-month high.
Australia’s All Ordinaries Index Gains, Asian Indices Slip
Asian stock indices are mostly lower today. Nikkei lost 0.3% to 22200.00 as yen climb against the dollar continued. Chinese stocks are falling despite reports China central bank injected 267 billion yuan in targeted medium-term loans: the Shanghai Composite Index is down 0.1% and Hong Kong’s Hang Seng index is 0.7% lower. Australia’s All Ordinaries index however extended gains 1% boosted by Australian dollar accelerated decline against the greenback as stagnant inflation raised the prospect of a rate cut.
Brent Down On Expected US Crude Build
Brent futures prices are edging lower today. The American Petroleum Institute late Tuesday report indicated US crude inventories rose by 6.9 million barrels last week while gasoline inventories climbed by 2.2 million. Prices ended higher yesterday. June Brent rose 0.6% to $74.51 a barrel on Tuesday. Today at 16:30 CET the Energy Information Administration will release US Crude Oil Inventories.