THE NEW ZEALAND DOLLAR/CANADIAN DOLLAR
Is trading the NZD/CAD right for you? Find out more about what it means to trade these currencies and what kind of opportunities await those who do. Learn more about market movements, important financial factors and other crucial information that every trader needs to know.
WHO SHOULD CONSIDER TRADING THE NEW ZEALAND DOLLAR/CANADIAN DOLLAR?
Day traders should give the NZDCAD some consideration for their portfolio. Fluctuations in the currency pair can provide ample opportunity for those searching for short-term gains.
This currency pair can be part of a solid portfolio foundation. Whether used for diversification purposes or as part of a hedged bet, the New Zealand Dollar and the Canadian Dollar are a valid option for many traders.
Those searching for more long-term opportunity, can add this pair to their list of possible investment options. Both currencies have historically shown some stability that merits consideration.
WHY DISCUSS THE NEW ZEALAND DOLLAR/CANADIAN DOLLAR?
Much like the other English-speaking countries, New Zealand and Canada share historical ties going back hundreds of years, along with ties to the UK and the Commonwealth. In addition to their shared past, the trading and financial relationships of both countries are healthy and stable.
WHAT YOU NEED TO KNOW ABOUT THE NEW ZEALAND AND THE CANADIAN DOLLAR
The combined size of both economies hovers around the three trillion dollar mark. However, despite the good relations of Canada and New Zealand, their trading relationship remains under one billion dollars annually. The NZD/CAD is influenced more by external sources than by the trading relationship between the two countries.
The Canadian Dollar, also known as the Loonie, has been a major part of the global economy for many decades. The GDP of Canada is 1.65 trillion USD, and its debt and inflation have been properly managed by government officials. New Zealand on the other hand, is a much smaller economy, with an annual GDP of 205 billion dollars. Despite facing some major obstacles to prosperity, including geographical isolation and a small population, the country has done extremely well.
HOW HAVE THE TWO CURRENCIES FARED AGAINST EACH OTHER OVER THE LAST TEN YEARS?
In the fall of 2008, the NZD CAD declined sharply as the New Zealand economy was hit hard during the economic crisis. The Kiwi dropped to 60 cents to one Canadian Dollar. The NZD has recovered in recent years, climbing steadily to 85 cents near the end of 2018. While fluctuations tend to occur over the span of several months, it is easy to spot a clear rise of the New Zealand Dollar.
WHAT ARE THE FACTORS THAT MOVE THE NZD/CAD VALUE?
It is highly recommended to track the reports coming out of both economies, as they can have a drastic effect on their respective currencies. This includes the Non-Farm Payroll and any PMIs that are produced. The interest rate reports are also crucial, as the interest rate on a currency often has a direct impact on its value. Central Banks can often influence a currency in ways other than interest rates. Simply speaking to the media or releasing a meeting minutes to the public, can cause market fluctuation in the short term.
WHAT YOU MAY WISH TO CONSIDER
Uncertainty in the Canada – US relationship could have dire consequences for the CAD. The United States is Canada’s largest trading partner, and both countries rely heavily on each other for financial services, raw materials, automotive products and more.
Look out for earthquakes in New Zealand. While not as frequent as in Japan, the New Zealand Dollar can certainly fluctuate in the short term after such an unfortunate event.
HOW DO I TRADE THE NEW ZEALAND DOLLAR/CANADIAN DOLLAR?
While there are several ways to trade currencies, these are the three most prominent methods that have been used over the last several decades.
Online Broker: An online broker is a quick and easy way to trade currencies and many other types of financial assets online. eToro, a regulated financial broker, is a great example of an online financial service provider that allows traders to access their accounts and place trades in a matter of seconds.
Bank: Financial institutions, such as banks, were quite popular for traders, until the last several years. Despite a proven track record dating back hundreds of years, banks have not been able to keep pace with the more modern online brokers.
Change: The good old fashioned change stores have been serving currency exchange traders and tourists for many years. But they are no longer practical for most traders. The internet has changed the rules, and this ancient method of currency exchange is no longer practical in terms of safety and convenience.
IS TRADING THE NEW ZEALAND DOLLAR/CANADIAN DOLLAR RIGHT FOR ME?
Yes, if you are willing to track market movements, read financial reports and understand that online trading is a constant learning experience. If you have the patience and the desire, then online trading is right for you.
*This content is for information and educational purposes only and should not be considered investment advice or an investment recommendation.
*Past performance is not an indication of future results. All trading carries risk. Only risk capital you’re prepared to lose.