Since the beginning of December, NZD/CAD has formed a steady uptrend. And with prices compressing above an established trendline, we see potential for the rally to resume.
The price structure on the daily chart is firmly bullish and the trendline from the December low continues to act as support. With momentum on our side we are seeking bullish trades.
Admittedly the decline from the 0.9515 is a little deeper than we’d like as a shallow retracement is generally preferred. But given we can see that two signs of compression have formed while prices veered towards (and held above) the trendline, a little comfort is provided to the bull camp. A potential bullish wedge is in the making which, if successful, projects an initial target around the 0.9515 high. Moreover, further signs of compression are seen in the form of narrow ranged candles and inside days within the wedge patterns itself.
The two recent swing lows of the wedge suggest support resides around 0.9275/85 and, assuming today’s candle finishes higher than its open, we’re on track for a bullish outside day above support. This will surely catch the eye of some traders who prefer to trade with the trend.
Still, one man’s trend is another man’s correction, so we need to keep an eye on which direction the next burst of momentum takes. If we see a decisive break lower and it breaks the trendline, the chart would appear more appealing to bears. So if we wait for bullish momentum to return, we may stand a better chance of sticking with the trend.