Looking for a chance to add more euro shorts to my book and this down trending pattern on EUR/NZD looks like it could be ready to go with a little bit more bounce higher.
EUR/NZD’s Slow Grind Lower
Fundamentally, my euro short bias hasn’t changed since shorting EUR/USD and my previous short play on EUR/NZD in February. If anything, it’s been confirmed that Europe will likely continue to see rough waters ahead based on the latest European Central Bank monetary policy meeting. Draghi and company shifted dovish a bit more, enough so that they even announced a fresh round of stimulus for banks to help the euro zone’s slowing economic picture. Euro currency pairs dropped on the news, but have since rebounded somewhat over the last week. I think there is likely to be bearish pressure on the euro longer-term as it’s more likely the European economy has topped out on growth for now.
So, I’m looking to short EUR/NZD mainly on a short euro fundamental bias, and to hopefully catch the positive carry from the interest rate differential in favor of the Kiwi, and the established trend lower in price since December of last year.
But I’m staying in watchlist mode for now with the quarterly read on GDP from New Zealand next week and the Reserve Bank of New Zealand’s latest monetary policy meeting coming at the end of March. The economic data has not been great for the Kiwis in recent months, especially with trade and jobs data disappointing in February.
I expect a little bit more bounce higher for EUR/NZD in March, and if that previous area of interest around 1.6730 (which lines up with the falling ‘high’) is retested and holds, I’ll look to put up a short trade plan 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.
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.