With FX volatility still snooze mode, there’s really no choice but to look at the longer-term time frames for opportunity.
Fortunately, I think I found one with this simple Fib setup on EUR/NZD.
EUR/NZD Fib Resistance?
Fundamentally, the Euro Area has had optimistic reads in sentiment survey data and a pick up in inflation in recent weeks, while in New Zealand we just saw a tick lower in the fourth quarter 2016 GDP read (0.4% vs. 0.7% expected).
This combination of economic developments is likely the big driver for the recent rally in EUR/NZD from a swing low around 1.4650 up to the 1.5450 area.
But longer-term, I’m slightly biased towards the Kiwi as the Reserve Bank of New Zealand recently gave an optimistic outlook at their recent meeting and they’re still not likely to cut rates.
I think this will bring back support for the Kiwi eventually, especially since the Kiwi does have the highest interest rate relative to the other major currencies.
As for the euro, with sentiment survey and inflation data in the upper area of historical ranges, I think we could see a topping out of the euro rally, which really wasn’t much compared to its 2016 decline.
The euro is in a longer-term downtrend so I think this bounce will likely draw in sellers eventually, possibly during the European election season, on possible negative effects from Brexit, or even on recent positive risk sentiment pushing traders out of funding currencies.So, I’d like to short EUR/NZD sometime soon for a longer-term position, but I’ll wait for a bit to see if the market gets back up to the Fibonacci retracement area, starting around 1.5450 up to 1.6000.
Stay tuned for a fresh idea if it does retest, and until then I’ll be working on my Q1 2017 review as we close out March!
Stay tuned and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.
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