EUR/NZD Attempting Long Term Descending Wedge Breakout

Many folks have been questioning “why the EUR strength?” recently. Although I don’t know the answers, what I can say is technically, the EUR is rallying against most every currency. So, from a “cross rate” perspective, this should keep the EUR (at least) afloat and performing better than most other G10 currencies for a while.

I wanted to turn your attention to this weekly chart on the EUR/NZD. It’s attempting a major breakout from a long term descending wedge. A move above and daily close above 1.5900 today would be extremely bullish technically in the near term. Whether you look to trade this pair or not, it should at least make you consider the following 2 points:

  1. Reconsider long NZD/USD trades for the near term (or long NZD for that matter).
  2. EUR bullishness on crosses like this should make you think twice about being short EUR’s

One of the best trades (post) financial crisis have been short the EUR/NZD & EUR/AUD for the positive carry interest and….well…just to be short “EUR” in light of the European crisis. Heaven forbid if those trades get unwound, you could see a pretty aggressive short squeeze here which would be EUR positive, high beta (NZD and AUD) negative.

Also consider that bullish EUR/NZD moves typically have a “risk off” association for most other asset classes too.


Blake Morrow

Follow me on Stocktwits or Twitter @pipczar

Disclaimer: I have carried a long EUR/NZD for the last 1+ month and am adding to longs currently.

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