The New Zealand dollar managed to life today as US dollar selling was strong before the London fix. It has so far managed to buck the trend for currencies recently as its strong bullish rally has been a case of the strong fixed interest rates as the FED continues to look dovish. Attention however will turn tonight’s all important trade balance data which is expected to show a deficit of -323M. This prediction is most likely already priced into the market, but the last four trade balance readings have been positive and dairy prices have started to rebound as well, all of which could play into the hands of kiwi bulls looking to push the NZDUSD higher.

Technically speaking, the NZDUSD has been very strong and the recent trend line has so far held out, and the drop today found strong support at the 20 day moving average, as it looked to stop any further bearish movements. However, on the H1 we saw a double top and a reversal pattern start to form, and I would be hesitant before looking to see the bulls take complete control again early on. Any further highs are likely to find stiff resistance at 0.7311 which has so far held out against the bulls. A rejection of this level could lead to the bears charging back into the market and a genuine sell-off in the NZD and it will be interesting to see how the trade balance data affects the movements for the NZDUSD.

Canadian bulls are doing some soul searching recently as the Canadian economy continues to struggle on the back of the results from Friday evening which showed core retail sales m/m dropping sharply to -0.8% (0.3% exp) – a big hit for the Canadian economy which has been looking for the retail sector to pick up during the summer spending period. On top of this, CPI data m/m showed a dip to -0.2% (-0.1% exp) which will not be helping confidence in the economy. The only ray of light for the Canadian economy was wholesale sales m/m lifting to 0.7% (0.1% exp). Overall, though the rest of the week is unlikely to receive anymore positive news as the USD will be the main driver, and with Jackson Hole happening it’s likely all media attention will be focused on the result of that conference.

The charts have been very bullish for the USDCAD as it looked to jump up strongly the charts. So far the strong rally has almost pushed up to resistance at 1.3001 and it’s likely the market may look to take a pause here as this will also be a key level for the 20 day moving average. Any drops back down the chart are likely to hold up on support at 1.2887. Overall, the market has so far been looking bullish for the USDCAD and it certainly looks like the real test will be at 1.3001 at this rate, to see if the bulls can continue their momentum.