Taking a look at EUR/NZD this week with the latest RBNZ meeting ahead to potentially break this pair out of a tightening price pattern.
EUR/NZD Short Play
In case you haven’t caught up yet, the top tier short-term catalyst for the week is the latest interest rate decision from the Reserve Bank of New Zealand, coming June 24th at 2:00 am GMT. This tends to be a big market mover for the New Zealand dollar, especially against the euro as we’ve see 200 – 300 pip moves at the last few interest rate decisions.
With that volatility precedence, I think the tightening price action in EUR/NZD is a setup to play a big move if we get something from the RBNZ outside of the current expectations of no changes to monetary policy, and/or a change from its continued dovish tone on the economic outlook.
Also, any commentary from the RBNZ to limit the Kiwi’s recent rally against the majors since the coronavirus panic lows back in March may spark a big move short-term.
So, I’m looking to play a break of the price consolidation marked on the one hour chart above of EUR/NZD. We can clearly see a pattern of falling ‘highs’ since topping out around 1.7650, while the bulls have taken control quickly on any retests around 1.7350.
I’ll be using an OCO order for my entry on this trade, and my stop on both orders will be roughly half of the daily ATR. My target will be three times my risk since this is meant to be a short-term trade on a top tier event. Here’s what I’m doing:
Long quarter position EUR/NZD at 1.7500, max stop at 1.7420 with 0.25% risk, max target at 1.7740
Short quarter position EUR/NZD at 1.7325, max stop at 1.7405 with 0.25% risk, max target at 1.7085
I’m only risking 0.25% of my account and I’ve got a solid short-term potential return-on-risk of around 3:1.
Based on what the RBNZ does and what happens with the price action after the event, I may change this plan if it makes sense to do so. If my orders are not triggered by the end of the U.S. session tomorrow, I will cancel my orders.
Be sure to manage your risk and avoid overexposure.
What do you guys think? Are you watching EUR/NZD for a potential short-term position as well? Let me know in the comments section below!
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