Potential signal:
- I be a buyer at the 1.7750 level, with an eye on the 1.7950 level as a target.
- I would have a stop loss at the 1.7633 level underneath for protection.
- The euro fell a bit during the course of the trading session on Friday, to test the 1.7650 region.
- This is an area that’s been supported multiple times in the past and most certainly over the last 4 or 5 sessions.
- At this point, it looks like the euro is doing everything it can to form some type of bottom against the New Zealand dollar.
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That being said, keep in mind that this is isn’t exactly the most common pair to trade, so it does have its own quirks. Think along the lines of commodities versus risk appetite. While both can rise at the same time, it’s actually likely to see this market rise in times of concern, because most people would rather have their money in European banks in times of trouble instead of New Zealand banks, although I’d be the first to admit that I’m not exactly concerned about the New Zealand economy overall.
Interest rate differential is minor to say the least, so that doesn’t come into play here is either, so this pair does tend to be very choppy as of late. This isn’t like shorting the Japanese yen, a trade that has made quite a bit of sense for some time, due to the fact that you aren’t necessarily breaking in the swap at the end of the day in this pair, regardless of which direction you are trading.
Technical Analysis
At this point, we are well below the 200-Day EMA, but we are also in an area that’s previously been supported. The New Zealand dollar itself isn’t necessarily strong, but neither is the euro. In other words, I think you continue to see a lot of noisy behavior in this pair to begin with, mainly due to the fact that neither is a currency that everybody wants to own. In fact, I’m starting to be a bit concerned about the summer in the Forex world, because it looks like most currency pairs don’t have a whole lot going for them, at least not as far as majors are concerned. Both of these are major currencies, even if they are considered to be a “cross currency” against each other.
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