NZD/CAD – BoC Tapering Fails To Retain CAD Buyers

#OPINIONLEADER# #Signal#

 JUL 15, 2021

• BoC carried out second QE tapering
• OPEC+ uncertainty hindered CAD buyers
• Potential upside in NZD/CAD beyond 0.88 handle

Chart 1: NZD/CAD D1 chart

The Bank of Canada (BoC) carried out its second quantitative easing (QE) tapering yesterday during their monetary policy meeting. The pace of QE is now adjusted from $3 billion per week to $2 billion per week while interest rate remains unchanged at 0.25%. The central bank also highlighted that further adjustments of QE will depend on the strength and durability of the economic recovery. In the monetary policy report, the BoC revised its GDP projection for 2021 from 6.5% to 6.0% due to the third wave of COVID-19 while revising its projection for 2022 upwards from 3.75% to 4.5%.

However, with the hawkish move from the central bank, the strength of the Canadian dollar was short-lived. This is likely due to the recent uncertainty caused by the OPEC+ which indirectly impacts the Canadian dollar. When comparing the QE tapering carried out by the BoC with the RBNZ, the latter is undoubtedly more aggressive than the former’s, which explains why NZD/CAD was able to sustain its gains yesterday. At the moment, NZD/CAD is attempting to break above the 0.88 handle. If successful, we may be seeing a strong upside in NZD/CAD, presenting buying opportunities.

Trade Setup for NZD/CAD (D1)

Buy Stop at 0.88600

Upcoming major news that may impact price movement of NZD/CAD

16 July – New Zealand CPI q/q data release at 0645 (GMT+8)

28 July – Canadian CPI m/m data release at 2030 (GMT+8)