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NZD/CAD: another end of a channel?

NZD/CAD: another end of a channel?

Information is not investment advice

If we look purely technically at NZD/CAD, here is what we will see.

Throughout the entire May, with the exception of a dropdown during the third week of the month, the currency pair was moving sideways. Its movement was contained within the channel supported by 0.8482 and capped by 0.8560 from the upside. Closer to the end of the month, NZD/CAD made a surge above the channel’s upper border at point A. After that, it bounced down, stayed at the upper border again, bounced down again, and broke the channel to establish itself at a higher baseline level.

Eventually, it is now in a new sideways channel since the beginning of June: the lower border is at 0.8717, the upper border is at 0.8790. Now, just recently NZD/CAD inched above the resistance of the channel at point B, bounced down, and currently is in consolidation at the upper border. If it follows the same pattern it formed in May, we are going to expect some more consolidation right below 0.8790, then a bounce down, and eventually a sharp rise to a new baseline level.

Important: following the pattern doesn’t necessarily mean copying it. Probably, it would even be unwise to expect exactly the same behavior from NZD/CAD as in the previous month. For this reason, what we are to expect is a shift that will push the price out of the month-long sideways channel. It may be a bullish move to a higher base like at the beginning of June, it may be the opposite, in fact, or it may be just an end of the sideways pattern. So the first thing to prepare for is the end of the sideways channel. After that, market sentiment and fundamentals will tell how exactly it will end and what may come next.

In the short term, though, expect consolidation at the resistance level and a bounce back. If that fulfills, let’s get back to the currency pair and refresh the outlook.

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