The Loony has had a good run recently but the USD has bitten back into some of those movements as USD bulls have recently become a thing again. This, however, has been further compounded by today’s statements from the head of the Bank of Canada (BoC) where he outlined the fact that future interest rate rises are unlikely to occur until 2018. This has also been as a result of the rise in the Canadian dollar which has weakened the inflation outlook, so it could certainly be sometime until the Canadian economy sees strong inflation returning. For the most part though the Canadian economy has been doing well, but the NAFTA problem caused by the trump administration continues to be a bit of a cloud with a real threat of potential tariffs.
The USDCAD has been a bearish trade for some time and it’s starting to turn in the market place. Yesterdays candle has pushed through the 50 day moving average, which is an aggressive move based on historical price action. Expectations are now that we could see further bullish movements higher to resistance at 1.2553 and 1.2759, with the potential to go even higher if the USD continues to strengthen. In the event that we saw another Trump failure in congress or the senate then it would most likely dip back down to support at 1.2429 and 1.2219.
It was business as usual today for the NZD as the Reserve Bank of New Zealand (RBNZ) surprised no one by holding interest rates flat at 1.75%. The real story around the RBNZ statement however was that they were not looking to raise rates for some time and we continue to look to apply accommodative monetary policy where necessary. The reality is that the housing sector has dipped and construction which has been a cornerstone for GDP growth has dropped off as well. The RBNZ now expects inflation to taper off and GDP likely to be affected in the long run as a result. Obviously, this is just a part of the NZ economy, but it certainly feels like the high flying kiwi could hit turbulence in the near future unless we see a turn of fortune.
For traders on the NZDUSD it seems the bears may continue to swipe away, as there is no end up in sight of the current situation. As mentioned yesterday the 200 day moving average continues to be the main target for markets looking to take profit as it provides a key dynamic support level, with additional support levels also at 0.7219 and 0.7157. Resistance seems like a far off target at this point but it can be found at 0.7323 and 0.7400. The key thing also that will weigh on the NZD will be the RBNZ looking to push the currency lower if it can to help restore inflationary pressure and give a boost to exports which recently dived sharply in the latest trade balance figures, but for now the bears look to be in control and will likely continue.