Photo - Andreas Zanin
Andreas Zanin
Analysis | February 5, 2021

EUR correlated pairs: analysis and trading zone

As per our previous posts, the euro has fallen as expected and we think there is a lot more downside to come. In this article, we will look at potential trades in the Euro correlated currencies USD/SEK, USD/NOK, USD/CZK, and USD/PLN.

Euro Correlated Currencies – Euro Weakness To Send Euro Proxy Currencies Lower?

In terms of Euro zone the economy is struggling, lockdowns are impacting on growth and the vaccination rollout is not going well – the market is optimistic of a quick economic recovery but the data doesn’t support this view.  All the euro correlated currencies will fall if the euro continues to sell off to the downside due to their exposure to the zone in terms of and they could fall faster in previous but euro sell offs the correlated currencies have very often had bigger declines. We think the risk to reward is attractive in terms of trading the USD long…

Note: On the charts below we have focused on buying breakouts but the USD is a buy in our view on pullbacks as well in our view. In terms of targets – we have based them upon sentiment and how short speculators are of the USD and if the speculative positions unwind short covering by speculators should in our view target the levels indicated.

USD/SEK

In terms of the EUR Correlated currencies we are looking at today the SEK has been the strongest over the last year but the USD is now moving higher and we have just broken out above nearby resistance and we are now moving away from the 20 day moving average (the green line) which after the USD recently broke above it has provided support and we expect it to continue to do so – We expect the whole of the fall which started in November to be retraced.

USD/CZK

This is one of our favourite chart setups – we have a tight range and volatility has dropped as the outer Bollinger Bands (the orange lines) contract. This fall in volatility warns of a big move coming and we think it will be to the upside. An upside breakout is expected to follow through strongly and stop protection can be below the bottom of the channel. Of the euro correlated currencies the CZK has held up well despite euro weakness but we think this is about to change.

USD/PLN

The USD has worked its way higher and pullbacks have found support around 20-day moving average (the green line) and we expect more upside – If we breakout above last week’s highs we would expect to see follow through buying to recent highs.

USD/NOK

While the NOK is, of course, a euro correlated currency it’s also a petro-currency (Norway is Europe’s biggest oil exporter) crude oil has moved sharply to the upside and we expect a correction which will also weigh on the NOK. After moving up from chart lows we are trading above the 20-day moving average and we expect a breakout to the upside.

 

 

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