Trading the EUR against the NZD. A fast moving pair with high risk but potentially high reward.
First let’s have a look at my overall bias for both included currencies:
EUR: bearish
NZD: bearish
While the EUR has been
recovering since mid-March the kiwi (NZD) is down 11% against the USD since end
of April. This has led the EURNZD cross rate to surge massively in the last
several weeks.
In my opinion this is a
good reason to have a closer look at this cross rate for some “counter-trend”
trades. Basically I am looking for shorts. It is counter trend for the last
couple of weeks but the major weekly trend is clearly bearish on this currency
pair.
Let’s see at which levels
the NZDUSD is now sitting. For our trade we need the NZD to go up against the
USD and against the EUR of course.
If you pull a weekly fibo
retracement over the NZDUSD weekly chart you will see that at the moment we are
at support sitting on the 50% retracement from 2008 lows to 2014/15 highs.
This should normally be a
good support. If we break here I expect it to fall at least 500pips lower which
would not be good for our trade.
So the first basic condition for our trade has been set. We can expect the NZDUSD to slow its decline or even to gain some momentum and to retrace a bit.
Now I want to take a closer
look at the EURUSD. The EURUSD is ranging at its 61.6% retracement of the
weekly extension fibo from 1.2041 to 1.0448 lows.
This is the picture on the
the weekly chart.
If you scale down on a
daily chart you will find the EURUSD ranging between the 50% and the 61.8%
fibos. It may look like we made a top on the 19. Of June. For me it is now
clear that I can expect the EURUSD going further down. Of course it will depend
much on the outcome of Greece and other macro-economical factors like FED rate
hikes etc.
As I try to focus on technical
analysis here I think the EUR would be a good short per se. However this is not
the goal for the moment.
The second factor of a bearish EUR which should fall more than the NZD falls to for us to make money is also given.
Now lets go to the EURNZD
chart.
I want to have a look on
the weekly EURNZD as the daily is a mess. It moves 300pips for a coffee as my
friend uses to say. :)
Without pulling any fibs
here I see weekly resistance from previous lows and supply zones.
But of course we are also
near from a fibo level which will provide good supply.
It is the 2011 highs to
2015lows retracement.
So we see, we are at good
resistance levels.
As you can see it looks we
made a top yesterday, but be cautious. Do not expect this to be the top. It may
but with EURNZD you never know. So be cautious and try to scale into a trade around
1.6450, 1.65, 1.650, 1.66, 16650 with stops all above 1.67. Targets may be around
1.40 and from there even lower.
So you have good
risk/reward. Manage the trade sizes and you may catch a nice move with
relatively low risk.
Good luck, and a lot of patience!
Seeya
