The forex market is the world’s largest market for currencies. It is also the most liquid market in the world, as it trades 24/5 and is always on. This high liquidity in the market means traders have to be aware of every aspect of the currencies they are trading. With the right knowledge and experience, it is possible for retail investors to make profits in this marketplace. This article will focus on the NZDCAD pair and everything you need to know before you trade it.
The NZD/CAD pair is an abbreviation for the New Zealand dollar and the Canadian dollar. This rate tells you how many Canadian dollars will get you a New Zealand dollar. For example, if the exchange rate is 0.89, this means 0.89 CAD will buy you 1 NZD. This rate shows you the strength of the NZD. However, when you go to a bank, you might only get 0.87. This is because the difference between the market exchange rate and the bank’s exchange rate is the profit that the bank earns.
Canada is the world’s 9th largest country with a GDP of $1,880 billion. New Zealand is ranked 50 with a GDP of around $243 billion. Despite this disparity, the NZD holds its own against the much larger and more liquid CAD. The NZD and CAD make it to the top 10 most traded currencies in the world. The NZD comes in at number 10 while the CAD is at number 6.
A couple of interesting points about both these currencies:
The chart below gives an idea of how the NZD has moved compared to the CAD over the last one week.
The chart looks pretty similar to a stock chart but it isn’t. The graph doesn’t show a price but an exchange rate. It’s a line graph which is one of the simplest graphs to read. It shows the movement of the NZD to the CAD over a period of one month. The x-axis represents the time and date over the week.
This currency pairing has been one of the most volatile ones, historically. One might compare their graph to two warring armies for all of the 1990s and the first decade of the 2000s. It is only in the last 5-6 years that the currency pairing has moved in a range. However, even this range has been very volatile.
In October 1991, NZD/CAD was at 0.64. By February 1995, it was 0.9. In April 1997, it was 0.97. It then fell to 0.76 in June 1998 and further to 0.62 in September 2000. The NZDCAD volatility continued through the 2000s, with pair hitting 0.88 in April 2004 and falling to 0.68 by July 2006.
During the Global Financial Crisis in 2009, the NZD/CAD pair fell to 0.64, a level not seen in nearly 20 years. The forex pair then steadily moved up to 0.96 levels in March 2014 before falling to 0.84 in July 2015.
The NZDCAD movement have been volatile but rangebound making it easier for traders to predict which way the needle will shift. For example, during 2021, we have seen the currency pair move between 0.91 and 0.88.
Economic decisions by the Bank of Canada (BoC) and the Reserve Bank of New Zealand (RBNZ) have significant impacts on the NZD/CAD exchange rate. The RBNZ has not hesitated to raise interest rates if it feels the NZD is appreciating beyond a certain point. A very strong NZD is bad for exports.
New Zealand is a major exported of milk, agricultural produce, fruit and meat. Commodities account for around 40% of the country’s exports. A rise or fall in these commodity prices causes the NZD to move in the same direction. Canada is one of the world’s largest oil producers. When oil prices go up, the CAD gets stronger. Thus, as you can see, there is a positive correlation between commodity prices and the NZD/CAD pairing.
This includes data like GDP, retail sales, economic decisions, industry data, political stability and elections, and new government policies. If data is better than forecasted, demand for commodities increases which strengthens the NZD/CAD pairing.
Inflation is very closely watched by both the BoC and the RBNZ. If inflation goes beyond each bank’s comfort rate, they don’t hesitate about using monetary policy tools at their disposal to control them. BoC was one of the first central banks in the world to announce that it would interest rates during the pandemic to bring inflation under control.
Both countries have very good trade balances. Forex traders and central banks keep a sharp eye on the countries’ imports and exports.
The NZD has been a strong performer in 2021 and has held its own well against powerful currencies like CAD and USD. The RBNZ increased the interest rates in October and another hike is likely on the cards in the near future. This should further strengthen the NZDCAD correlation.
The pairing can move to 0.91 levels. In late October 2021, Canada’s central bank said that it expects inflation would be high for most of 2022 because of high energy prices and supply chain constraints. If this happens the CAD will also hold its own.
The NZD/CAD currency pairing has been one of the most stable ones out there in recent times. There are several reasons to trade the NZD/CAD.
Liquidity: Both these currencies are among the top 10 traded currencies in the world. While this pair is not the most liquid in the forex market, it is still quite liquid which makes it possible for traders to generate profits. Both these currencies also act as proxy for their neighbours. This is a good pairing for both technical and fundamental traders.
Range-bound Volatility: The last seven years have seen the NZD/CAD pair move in an established range. There is high volatility in the pairing but the predictability makes it a smart pair to trade.
Market Timings: Though the forex market functions 24/5, the NZD/CAD pair sees maximum liquidity between 1300 to 1700 GMT. This is when both the London and New York markets are functional.
There are hundreds of forex brokers and websites where you can trade in NZD/CAD. However, it is essential that you choose on which is trustworthy and is compliant with myriad international rules and regulations. One of the best forex brokers to use is ZFX.
It’s very easy to start trading NZD/CAD on ZFX. All you have to do is follow the next steps.
You register on ZFX by submitting your full name, mobile number and email. Then, you’ll get a verification code on your mobile and you set up your password.
In case you are unsure about trading on ZFX and want to test it out, you can opt for the Demo Account. This is a training account that let you experience the ZFX interface without actually trading with money. It occurs in a risk-free, controlled environment. Think of it as a practice account. Once you are sure that this is the right one for you, you can opt for a Live Account.
It is then time to fund your account. Note that you can make deposits through bank transfers or credit cards. The minimum deposit required will depend on the type of account you choose.
Now, you need to verify your account. You need some documents for this: A national ID card, driver’s license or passport. Then, you have to scan or photograph select pages of your ID and upload them on ZFX. You have to upload a photo of your bank book or a copy of your bank statement. The photo should be the same as the bank account you set up when you opened your trading account with ZFX.
Now that you are all set up, you can start trading. You just have to download MT4 from ZFX. MT4 is a great trading tool. With its powerful analysis tools, a wide variety of instrument options and fully scalable and mobile compatible programs, MT4 is one of the most popular Forex trading platforms in the world.
A currency pair like New Zealand Dollar to CAD is a smart entry point for beginners because of its tight spreads and limited range movement. You might feel you have what it takes to master the forex markets but there are a few tips you should keep in mind as you get started:
Don’t Go All in on Day One: A lot of beginners drive right in but that’s the wrong way to do it. You should understand the markets and slowly build your strategies. Conduct NZDCAD analysis to figure out patterns and movements, and factors that influence the currency pair.
Define Your Objective: Don’t try to time the market to perfection. Keep it simple, know what you are trading, and once you achieve your objective, exit the position.
Recognize patterns: The NZD/CAD has a tendency to make sharp movements in either direction. It is volatile. Learn to recognize patterns and make it easier for yourself.
Start with a Demo Account: You have spent 10 hours a day for two weeks just studying the market and you are sure you have understood how the game is played. Great! Now is the time to test all your theories. Sign up with the Demo Account on ZFX and put your hypothesis to the test. You will get a chance to trade NZ to CAD in a risk-free environment and make your early mistakes there.
Know Your Numbers: As you keep gaining experience, recognize patterns in your trading style. Figure out when do you lose money and when do you make gains. Cancel the poorer trades out and focus on your strengths.
The NZD CAD pairing has decent levels of liquidity and enough volatility that enable traders to profit. Both are commodity currencies and this pairing frequently moves in a range, providing ample opportunities to make money. It is an excellent currency pair to invest in, and you can start trading it today through the regulated and reliable broker ZFX.