pair to range trade
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- Nov, 20 A Clear USDCAD Congestion Pattern may be Unsettled by Holiday Trading
- Nov, 20 The Force Needed to Develop a Major NZDJPY Trend Helps Range Traders
- Nov, 19 A Range at the Extreme of the USDCHF Trend may be More Stable than You Think
- Nov, 17 High Level Technicals and Fundamentals offer High Risk/Reward AUDCAD Range
- Nov, 17 Tight Stops and Targets Makes for a Quick AUDNZD Range Setup
- Nov, 13 A Settled EURGBP Technical and Fundamental Picture Exposes a Clear Range
- Nov, 12 GBPCHF Range Fortified by Technicals, Resistant to Fundamentals
- Nov, 11 AUDCHF Range Faces a Dominant Trend and Impending Event Risk
- Nov, 11 AUDNZD May Avoid Most Swings in Sentiment but its Range is Still Volatile
- Nov, 09 GBPJPY Offers a Risky but Otherwise Risk-Stable Range
- Nov, 07 CADJPY Epitomizes the Wedge Formation in the Yen Crosses
- Nov, 05 USDCAD Range a Tricky Setup with Friday's Employment Data
- Nov, 03 AUDUSD Channel Stands to Benefit should a Reversal in Risk Appetite Hold Off
- Nov, 02 EURUSD offers a Short-Term Range in the Lead Up to the ECB Decision, NFPs
- Oct, 30 USDCAD Range Dependent Upon the Dollar's Performance on Monday
- Oct, 29 Looking Past Short-Term Volatility to a Stable GBPUSD Range
- Oct, 28 A High Risk NZDUSD Range Reversal Setup Ahead of US GDP
- Oct, 27 Strong EURGBP Range could Develop into a H&S Pattern
- Oct, 26 A USDCHF Range to Keep with the Dominant Trend, Offset Exposure
- Oct, 24 High Probability EURJPY Reversal May Play Out as a Range Setup as Well
There is little we can do to escape the building fundamental and event risk through the second half of this week. If there is not a direct threat to any ranges we may come across through scheduled releases, then there is the potential for risk trends to stoke volatility.
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How stable is the EURNZD Range? • Levels to Watch: -Range Top: 2.0750 (Fibs, Reversal High) -Range Bottom: 2.0350 (Fibs, Trend, SMA) • The euro is the counterpart to those currencies that are more sensitive to risk appetite. For EURNZD, the attachment to underlying sentiment is clear. The New Zealand dollar is a currency that benefits from a rise in the demand for yield thanks to its relatively high 2.50 percent benchmark lending rate. However, when optimism sours, the kiwi dollar will suffer more than say the Australian currency because it does not carry the expectations for hikes in the near-term. • EURNZD has traded under a sort of congestion for months. However, there has long been a bias to this restrained price action. Until a significant reversal in late October, the trend was very consistently bearish. Since breaking the upper boundary of the consistent trend channel from May, we have seen former resistance turn into fresh support. Suggested Strategy • Long: Reduced size order will be placed at 2.0375 which is very close to the session low. • Stop: A stop of 2.0250 is notionally wide; but considering volatility, it is still relatively tight. To secure profit, move the stop on the second lot to breakeven when the first target hits. • Target: The first objective is greater than initial risk (190) at 2.0565. The second is 2.0715. |
Trading Tip – There is little we can do to escape the building fundamental and event risk through the second half of this week. If there is not a direct threat to any ranges we may come across through scheduled releases, then there is the potential for risk trends to stoke volatility. Sharp swings are not what we want for EURNZD. This is a pair that is transitioning into what could be a major trend reversal. However, the congestion that has developed following the notable trend channel break this past week reveals the hesitancy the market has in making such a major shift (this pair’s bearing and pace are a direct reflection of underlying market sentiment). Considering the heavy economic docket ahead and the sheer force needed to reverse an elemental trend that has defined the broader markets for nearly eight months, this is a setup only for those willing to take on the risk. For those that are willing to stick it out, our strategy must look to reduce risk. The first step is to reduce position size as the recommended stop is notionally wide (though from an average volatility standpoint it is actually quite close). The initial target is well within range of the average day and even the second is reasonable for a 24-48 time frame. Trading around the forthcoming data is tricky. The ECB rate decision is not likely to threaten this pair; but the FOMC rate decision, BoE rate decision and US NFPs can rile sentiment and therefore this highly sensitive cross.
Event Risk for the Euro Zone and New Zealand
Euro Zone – The European economic calendar is dense for the coming week; but the probability for volatility on this data is actually relatively light. Top event risk before the weekend is without doubt Thursday’s ECB rate decision. True to its efforts at transparency, the central bank is highly unlikely to change its benchmark rate. The real fundamental value of this event comes through the commentary that accompanies and follows the announcement. If there is a notable change to growth forecasts or liquidity through abnormal policy efforts is set to be withdrawn, the euro may find its position in the risk spectrum altered. Though not directly tied to the health of the Euro Zone, don’t underestimate the influence that the BoE’s rate decision or Friday’s NFPs could have the currency. Looking past the weekend, sentiment indicators will pop up; but it is advance 3Q GDP numbers due next Friday that are the real threat to stability.
New Zealand – Though the New Zealand is tracking the direction of its Australian counterpart, the two could easily diverge should risk appetite change course. The kiwi dollar is backed by a high benchmark lending rate (which offers a considerable spread over many of its peers); but there is little chance that the RBNZ will actually increase this yield until “late 2009.” This means that should sentiment ease, the Aussie dollar will be buffered by growth prospects and forecasts for a inflating yield; but the New Zealand dollar will be left to its own devices. As for event risk, there are a few notable indicators scheduled for release; but they do not have a solid record for volatility. This evening, the third quarter employment numbers and a planned speech by RBNZ Governor Bollard could offer a quick burst of volatility. After the weekend, the retail sales report is another notable indicator to watch.
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