The New Zealand dollar has broken through a key technical level, and this strategist says it's time to look out below.
There are a lot of currency pairs to monitor if you're a forex investor, and the New Zealand dollar/Canadian dollar may not be tops on your list.
But George Davis, chief technical analyst for fixed income and currency strategy at RBC Capital Markets, says it bears watching.
"NZD/CAD is attempting to complete a topping process via the bearish resolution of a rectangle pattern today," he wrote in a note to clients, and that is increasing downsize risk for the kiwi.
Interestingly, technical indicators suggest the risk also extends to the kiwi-dollar pair, Davis says, noting that the Australian dollar already started a bearish trend reversal against the greenback on August 17.
How low could the Australian or New Zealand dollar go with this trend?
If the Aussie closes below 0.8033 against the dollar, a key support level, that "would generate an equivalent trend reversal in NZD/USD, opening up 0.7906 and 0.7813 on the downside thereafter," Davis says.
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