TD's key takeaways on NZD/CAD:
1. Divergence in Terms of Trade: TD highlights a significant divergence in the terms of trade between New Zealand and Canada. Terms of trade measure the value of a country's exports relative to the value of its imports. A rising terms of trade can be beneficial for a nation's currency as it indicates that the country can buy more imports for the same amount of exports.
2. Oil Prices and CAD: The Canadian dollar (CAD) stands to gain from the recent surge in oil prices. Given Canada's status as a major oil exporter, higher oil prices can lead to positive terms of trade shocks for the country, strengthening the CAD.
3. Technical Outlook: TD anticipates that NZD/CAD could move below its year-to-date (YTD) lows of 0.8044. They identify an initial support level at 0.7927 (based on the 23.6% Fibonacci retracement over a 1-year daily window). Moreover, they don't rule out the possibility that the currency pair might retest last year's low at 0.767.
This summary is via the folks at eFX.
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