NZDCAD has been on a strong climb but its gains could soon be returned as price is already testing a long-term resistance. On its weekly time frame it can be seen that the pair is at the top of its range around the .9550-.9600 area. If this holds as a ceiling, NZDCAD could head back to the long-term support around .8600.
However, the 100 SMA is above the longer-term 200 SMA, indicating that the path of least resistance is to the upside. The gap between the moving averages is narrowing so a downward crossover might be imminent, hinting that sellers could take over.
Meanwhile, stochastic is indicating overbought conditions and might be ready to head south so NZDCAD could follow suit. RSI is already in the overbought area and could also turn lower, indicating a return in selling pressure.
Event risks for this setup include the BOC interest rate decision, although no actual monetary policy changes are eyed. The oil market appears to be stabilizing recently and fears of an oversupply have subsided, lending support to Canada’s energy sector. Upbeat remarks could restore demand for the Canadian currency while dovish comments could spur an upside breakout.
In that case, NZDCAD could be in for a thousand pips in gains, which is roughly the same height as the range. Keep in mind that the RBNZ has expressed its intention to keep rates on hold for the time being, citing risks to the housing market. Besides, data from New Zealand has shown plenty of improvements, particularly in business sentiment and in the dairy sector.
Data from China could also have an impact on Kiwi movement, as weaker growth and spending could spell lower demand for New Zealand’s commodity exports. China’s Q2 GDP is expected to slow from 6.9% to 6.8% while industrial production and retail sales could also be weaker.