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Because of the back and forth shifts in sentiment on geopolitical risks, I’m not seeing many setups that really jump out at me. But I am looking at this trendline break-and-retest on EUR/NZD to potentially play the latest round of risk-on flows.

Trendline Break-and-Retest on EUR/NZD

EUR/NZD 4-Hour
EUR/NZD 4-Hour

This is mainly a technical idea to play the recent return in positive vibes that we’ve seen in the global markets recently. With trade war fears stepping back, and the potential of a real physical conflict sparking over a potential U.S. strike on Syria hardly making a dent against the bulls, it looks like risk-on is the way to go for now.

And we can see this in recent price action on EUR/NZD, with the pair breaking a pattern of higher ‘lows’ in late March, favoring the higher-yielding Kiwi dollar ever since. Not too long after that, there was a bounce but the bears took it as another opportunity to short to solidify the break is not a fake out.

So, I like the momentum lower, especially ahead of European PMI data later this month, which has been creeping lower each month since the Markit PMI reading hit a recent high of 60.6 in December, versus a recent read of 56.6 in March. The euro could take a hit if PMI’s dipped once again as a fourth lower read is another confirmation that Europe’s growth may be stalling out.

The only other major economic event risk I see until the ECB meeting at the end of the month is New Zealand’s quarterly CPI data release next week. The longer term trend has been higher, but in recent releases it’s been pretty choppy, so I won’t venture to guess which way the number may go.

With that in mind, I’m going to  stay in watch mode for now to see if I’ll get a retest of that major area of interest between the 1.6800 – 1.6850 handles. If that retests and New Zealand CPI gives a bullish number, I’ll look to enter a short then.

So be on the lookout for a new trade idea if we do see a retest, and until then 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.

Risk Disclosure
Pipcrawler’s Q1 2017 Blog Trading Performance

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