Short-Term Range And Long-Term Breakout Potential For EURNZD

[B]My picks:[/B] Long EURNZD
[B]Expertise:[/B] Combining Money Management with Fundamental and Technical Analysis
[B]Average Time Frame of Trades:[/B] 3 days - 1 week

The euro was catalyzed into a significant breakout this past week against its US counterpart; but the same strength was not shared amongst the crosses. This could have complicated implications for the world’s most liquid currency pair; but I would rather wait for a clear move than try to speculate on a potentially trend-defining shift. Instead, this week, my euro pick will follow an exotic - EURNZD. This was my range setup from late last week; and my same setup will apply this morning (as we saw a rally and reversal this morning back to the same entry level).

From a fundamental perspective, this pair has obvious associations to the risk appetite; but recently, this direct correlation has ebbed as the economic strength of both economy have wavered and interest rate forecasts have taken a slide. This is a precarious position as one currency will eventually come out on top and the result could be enough to leverage a breakout. Bolstering the probability of a breakout, there is a clear convergence of trends and building breakout pressure in both near- and long-term formations. A rising trend from May 25, 2008 is pulling up a secondary support to a range low on a major 38.2 percent Fib near 2.2475. Resistance is less significant in a falling trendline that begins with the late April highs that is now coinciding with the 20-day SMA. My initial interest is in a range trade. I will place an entry order at 2.2535 and set stops down at 2.24. I will have staggered objectives - one set equal to risk at 2.2670 and a second set much higher at 2.2975. With such notional exposure, I will lower my position size to control risk. When the first target is hit, I will trail my stop on the second half to break even. This range setup is only a short-term setup (if it is not entered in the next 24 hours, I’ll cancel all open orders). My real interest is in a breakout. The upside is the path with the least resistance; but a bearish break has the greater opportunity for follow through.