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I’m back to the drawing board by pairing a strong currency with a weak one, and my fundamental analysis brought me to this long EUR/NZD trade idea.

Long EUR/NZD Idea

In last week’s ECB statement presser, head honcho Draghi attempted to downplay tapering expectations by jawboning the currency. Euro traders took this with a grain of salt, though, especially since the central bank head also clarified that the committee already started preliminary discussions on QE adjustments and that a decision might be reached next month.

In contrast, the RBNZ sounded less optimistic in their August policy announcement as they downgraded inflation forecasts and also warned that the a lower Kiwi is needed, with Wheeler keeping the door open for currency intervention.

To add to this, the Treasury’s pre-election fiscal update wasn’t all rainbows and butterflies either as growth forecasts were downgraded for this year and the next. Speaking of elections, this could likely be a source of uncertainty for New Zealand’s economy as polls are set to take place next week.

EUR/NZD 4-hour Forex Chart
EUR/NZD 4-hour Forex Chart

Onto the techs… I’m seeing a long-term rising channel on the pair’s daily time frame and zooming in to the 4-hour chart shows that there’s an area of interest around the middle of the channel.

Applying the Fib tool on the swing high and low reveals that this mid-channel area of interest is right in line with the 38.2% retracement level and the 1.6250 minor psychological mark. A deeper correction could still make its way to the actual channel bottom, but I’m thinking the line in the sand might be the 1.6000 handle.

There’s not much in the way of top-tier events from both New Zealand and the euro zone this week, however, so I might need to be a little more patient with this one. I’ll keep you guys posted when I’m able to hop in!



See also: Q2 2017 Trading Performance Review

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