NZD/CAD has more room to fall. On a fundamental basis, the New Zealand dollar has recently fallen victim to election uncertainty, lower dairy prices and U.S. dollar strength. These issues will continue to plague the currency after the final votes are counted. The National Party led by Bill English lost 2 seats while the opposition Labour Party led by Jacinda Arden won 1. Both parties need to convince Winston Peters that it is in their interest to form a government which will be a difficult task in the days to come. Peters has said he will make a decision by October 12th but it still not clear whether that will happen. Meanwhile, USD/CAD is losing ground as CAD bulls remain in control.
USD/CAD rejected 1.26 on Friday after relatively healthy Canadian data. Although net job growth in Sept was slightly less than anticipated (10K vs. 12K) and the participation rate fell slightly, full time jobs rose at its strongest pace on record. Canada has now experienced its 10th straight month of employment gains and its fastest pace of wage gains in 17 months.
On a technical basis, NZDCAD ended last week at its lows and appears poised for a move down to 88 cents. Gains should be limited by Friday’s high near 0.8950, which is well within our stop limits.
