The NZD/CAD pair rose during the session on Friday initially but as you can see ran into quite a bit of trouble at the 0.90 handle. This makes a lot of sense really because although the Canadian dollar is in a bit of trouble due to the oil markets, the one thing the candidate does have working for right now is the fact that it is attached to the United States. After all, the New Zealand dollar is much more sensitive to Asia and commodities in general than the Canadian dollar is. Yes, the oil markets look horrible but the Canadians at least have the Americans to send their exports to.
With that, it’s almost impossible to imagine that New Zealand is going to outperform Canada for to awfully long. This is especially true when you look at the fact that the Royal Bank of New Zealand has stated several times that they believe the New Zealand dollar is overinflated. With that, you can bet that the New Zealand dollar will eventually fall against most other currencies, not just the US dollar.
It’s about the Pacific versus North America
This currency pair can be thought of as Pacific versus North America. After all, most currencies are simply a representation of the reasons that they belong to anyway, and the New Zealand dollar is most certainly one of those that is most sensitive to the region. New Zealand provides a lot of the agricultural commodities and other softs to Asia, while the Canadians have the benefit of simply driving over the border in selling their goods to the Americans. So really this is more or less a play on China versus United States and perhaps some of the other developing Asian economies.
In a world where people are becoming concerned about economic growth worldwide, North America is always going to do better than the Pacific. Because of this, I believe that if we can break down below the lows of the neutral candle from Friday, but this pair can drop back down to the 0.8750 level.
