Forex traders continue to respect that falling trendline on EUR/NZD as a resistance area, so why not play my short euro bias there?
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For those who have been following me for a while, y’all know I’m a perma-bear on the euro. It’s a complex experiment that is going through tough times since the financial crisis, and it’s so bad that the European Central Bank continues to implemented negative deposit interest rates and extend asset purchases. Because fundamentals aren’t too great for the euro, I think there will continue to be underlying pressure on the shared currency, especially against the high-yielders in the recent positive risk sentiment environment.
This is why I’m choosing to short the euro against the Kiwi, which despite the recent surprise rate cut from the RBNZ, is still head an shoulders above the euro in both interest rate differential and economic stability.
With the market not quite all the way up to the falling trendline, I’ve decided to short a small nibble position with half percent risk at market, then if the pair travels up to the falling trendline, that’s when I’ll entry my full position. My max stop will be above the major psychological level of 1.7000 (which is also more than one WATR away), and my max target will be the next support level not seen since the beginning of January. Here’s what I’m doing:
Short half position at market (1.6600), max stop at 1.7075, max target 1.5900
Short half position at 1.6900, max stop at 1.7075, max target 1.5900
I’m only risking 1.00% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 3.85:1 if both positions are triggered. Of course, anything can happen in the forex markets, so if the story changes I’ll be sure to reassess and adjust quickly if necessary. Stay tuned by following me on Twitter and Facebook!