Free Profitable Forex Newsletter
Hey! This is Philip with this week's trade idea of the Free Profitable Forex Newsletter!
Yesterday’s Bank of Canada meeting was perceived as hawkish by the markets, and the Canadian dollar spiked higher, with NZDCAD and other CAD pairs plunged. The BOC Governing Council reduced the QE pace and upgraded their economic outlook, hawkishly surprising many Fx traders. But
Canada is not hit so hard by COVID-19 as other developed countries, and recent Canadian economic data, including CPI inflation yesterday, has been largely positive. So, at bottom, the hawkish BOC decision doesn’t come as a complete surprise.
Still, the market reaction (e.g., USDCAD 150 pips lower) tells us that many did not expect the BOC’s changes and that there was a notable hawkish surprise element around this meeting. While Canada’s fight against COVID-19 is far from
over, the country’s 8,000 - 9,000 daily new infections are a cut above other nations that are reporting tens of thousands new cases per day.
With vaccinations expected to pick up pace, Canada’s recovery should stay well intact. The string of positive economic data and a more hawkish than anticipated Bank of Canada, therefore, looks like a good mix for higher CAD exchange rates. The currency is likely to stay broadly
supported in the major Fx pairs, the degree to which will also depend on how other currencies trade. At present, calling the USD direction seems tricky, especially since we have a pivotal Fed meeting scheduled for next week. So, we are turning to the crosses to go long on the CAD, where the NZDCAD pair looks attractive from a “short positioning” perspective.
Short NZDCAD to play the Canada-New Zealand Divergence
NZDCAD staged a solid rejection of levels above 0.90 on the BOC meeting yesterday. This also comes within the context of a preceding larger bearish leg from March that was triggered by the New Zealand Government’s decision to restrain the heating housing market. The RBNZ (New Zealand’s
central bank) was also recently instructed to consider the developments in the housing market for setting interest rates and monetary policy. On the whole, this should make the RBNZ a more dovish central bank in the future than before.
Next week’s CAD Fx calendar features Canadian retail sales on Wednesday and GDP on Friday. If the data beats expectations again, the loonie dollar is likely to get a further boost. Overall, the CAD dollar should stay firmer than the Antipodean
dollars in the period ahead, with the NZD the likely bigger underperformer. Hence, our trade idea for a short NZDCAD trade.
Gorilla Trades, one of the country's most trusted research services, is offering a 30 days trial to try their flagship service Gorilla Breakout Alerts. The trade alerts will be given using the Breakout Scanner software.
As noted above, the technicals show a clear rejection at the 0.9050 resistance area, where seemingly we now need a move below 0.8950 to open further downside potential. But the current levels with the resistance close by look attractive for short
entries, especially also as the reversal here occurred on the BOC meeting. This suggests the probabilities are higher that the top is already behind us here.
If that’s the case, we will likely see NZDCAD move down toward the March lows around 0.8750. This would make an attractive target of around 200 pips from current levels with a 2:1 reward-risk ratio.
Entry:
- Look to enter short near current levels (0.8975), or higher if possible;
Rallies above 0.90 could offer excellent opportunities to enter at better levels and reduce risk;
Stop:
Targets:
Trade signals from the past week
- March 29 2021 – Short Silver from $24.60, position closed on April 19 at $25.80 after setup was invalidated = -$1.20 per ounce sold [in our context this would equal to around -120 Forex pips when adjusted for a similar-sized Fx position and for Silver’s inherent high volatility]
- April 8, 2021 – Short EURJPY from 129.95 on a break below 130.00 (in progress); trade idea sent on April 2
TOTAL: -120 pips in the past week
TOTAL: +3780 pips profit since October 1, 2018
If you have any questions or feedback, don't hesitate to reply to this email.
Thank you!
High Risk Warning: Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.
Any opinions, news, research, predictions, analyses, prices or other information contained in this newsletter is provided as general market commentary and does not constitute investment advice. FX Trading Revolution will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
|
|
|
|
