Last week I was looking to get into a long position on EUR/NZD at better prices but never got the pullback I was looking for. Taking another shot on the pair as the uptrend seems to be gaining steam.
EUR/NZD Momentum Higher
As mentioned above, I tried taking a long position on EUR/NZD last week as the pair was ranging, hoping to get in at the bottom of the range to play my fundamental bias on the pair.
My fundamental bias hasn’t changed since then, and actually has gotten stronger in favor of the euro over the Kiwi as the RBNZ expands their stimulus measures and continues to hint at their openness to the idea of negative interest rates if needed. This was actually the main driver for EUR/NZD’s move higher without another pullback last week and nearly one way move into the weekend.
So, I’ve definitely missed out on the rally last week, but I don’t think it’ll end here in the medium term. For the short-term though, stochastic is signaling a potentially overbought conditions so a pullback could be in the cards this week (a likely scenario if the upcoming European PMI updates disappoint).
Given the strong fundamental themes in favor of the bulls for now, rather than trying to wait for another pullback, I will scale into a small position starting with a nibbler at current prices. I’ll add to the position on a pullback down to the previous levels of interest / major psychological levels marked on the chart above (1.8000 & 1.7900).
My stop will be below 1.7900, and my target will be two times my risk to start, hopefully adding further to the position to max out my potential gain if the current themes continue to hold. Here’s what I’m doing:
Long third position on EUR/NZD at market (1.8140), max stop at 1.7770 with 0.28% risk, max target at 1.8400
Long third position on EUR/NZD at 1.8010, max stop at 1.7770 with 0.32% risk, max target at 1.8400
Long third position on EUR/NZD at 1.7910, max stop at 1.7770 with 0.4% risk, max target at 1.8400
I’m only risking 1.00% of my account if all positions are triggeredand I’ve got a solid potential return-on-risk of over 2.10:1 to start. I plan on adding to this trade/rolling up my stops if the pair rallies higher without a pullback if the themes continue to favor a long position. And of course, if the story changes for either currency, I’ll be sure to cut the trade away quickly and move on to the next one.
Be sure to manage your risk and avoid overexposure.
What do you guys think? Are you watching EUR/NZD for a potential long position as well? If so, are you waiting for a pullback? Let me know in the comments section below!
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