With many still pointing out fundamental weakness that could trouble Draghi more (Bruised Germany Is Canary in Coal Mine for Europe’s Troubles), and despite the delay of a FED rate hike, plenty of traders are looking to get or stay short the Euro. That said, there has been no signs of any continuation of the downward move in EUR/USD which went from $1.39 in May of 2014 to $1.05 last March (a 24.4% drop in ten months). It has bounced a good quarter of the way back upward to over $1.14 today and if EURUSD can stay above this week’s low, this week will mark the first week the pair has traded above the MDMA (the 200 day moving average) in almost 18 months.
So how can you short the Euro without trading against the upward trend in the EUR/USD pair? An option is to short EUR/SEK. This pair has gone from 8.18 in August of 2012 to a high of 9.73 in December of 2014 (a 19% move). Since last December, the pair has traded more and more narrowly between 9.25 and 9.60. Perhaps a new downward trend is breaking out. Swedish Krona Jumps to 3-Month High as Inflation Beats Forecast. While the EUR/USD pair looks to be breaking into a new upward trend, the EUR/SEK pair is trading below the MDMA (200 day moving average).
With several weeks in 2015 printing below the MDMA, some may say “Oh but it has broke below that moving average a few times without plunging into a new downward trend.” True and this week may be no different, but remember that when reverses occur prices often touch trend lines or moving averages many times before reversing.
To short EUR/SEK you will have to be mindful of the negative rollover/swap that you will incur, but it is not too different from the rollover/swap costs for shorting GBP/USD. Any funny-mentalists shorting this pair? Let’s see how this progresses.
May the forxe be with you.
-Adrian