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The euro was able to climb higher in the past month against Kiwi, but can’t seem to break away from 1.7000. Bears taking back control?

Fib Short on EUR/NZD

EUR/NZD Daily
EUR/NZD Daily

Well, for me I think this could be a good time to start nibbling on a short position in EUR/NZD. I think the euro could be in for some hurtin’ this month as not only have we seen weaker-than-expected business and investor sentiment data popping up recently, but expectations that we won’t see a rate hike from the ECB before mid-2020 are rising as signs of recession seems to be showing up lately.

Looking forward, the rest of January is filled with European economic data, so the catalysts are there for potential volatility for the euro, and given the recent data, odds are in favor for some pressure. If the data continues to show weakness through the end of the month, then January’s European Central Bank monetary policy meeting could be a good one for euro bears.

On the other side of the pair, the Kiwi has a pretty good set of potential catalysts coming up like it’s own set of business sentiment indicators, but more notably, we’ll get the quarterly CPI number, which is likely to spark some action for the Kiwi.

From a price action standpoint, the pair has bounced up from the October swing move lower to 1.6330, now testing and consolidation around the 1.6900 – 1.7100 area. This is the 50% Fibonacci retracement area and a previous strong support area back in July that was broken in October. So, the bears have managed to stop the rally, giving me the signal are reversal back to the downside may be ahead.

With all of that said, I’m shorting EUR/NZD but in pieces because of how volatile this pair can be, starting with a nibbler position at market. I’m also going to put up another nibbler at the 50% Fib, and I’m keeping myself open to completing my full position around the 61% Fib. My stop will be the weekly ATR from around my average price, and my target will be the recent swing low last seen back in December. Here’s what I’m doing:

Short a third position  EUR/NZD at market (1.6953), max stop at 1.7450, max target at 1.6350
Short a third position EUR/NZD at 1.7130, max stop at 1.7450, max target at 1.6350

I’ll be risking only 1.00% of my account if I put in a full position and my potential max return-on-risk is about 2.44:1 Of course, I’ll look to add further to the position if it continues lower without a pullback, and I’ll adjust quickly (i.e., cancel orders, close trade, reverse trade) depending on how the driving themes develop in the global markets.

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.

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.