[Closed -200 pips] EUR/NZD Strategic Trade Plan
The Euro-Kiwi Conundrum: Trading the Divide
May 11, 2025
Okay, so that EURNZD trade we started on May 9th—with an entry at 1.9070 and a stop loss at 1.8870—didn't last long. It got stopped out right when the market opened after the weekend because the price gapped down hard. That's "market open slippage" for you; even if the daily chart later showed the price a bit higher, the stop at 1.8870 was hit.
The main reason? It really looks like news or just jitters about those big US-China trade talks over the weekend (May 10th-11th) shook things up. None of the other key economic numbers for the week, like US inflation or retail sales, had even come out yet.
So, the trade's finished, closed out at a loss, and that original plan is basically done. We knew big world events like these talks could be a major factor, and it seems this one just hit hard, overriding what we thought would drive the market. It just goes to show how tricky holding trades over the weekend can be when there's major news expected.
The Euro-Kiwi Conundrum: Trading the Divide
May 9, 2025
Welcome to this trade plan about the EURNZD currency pair. The immediate period is characterized by a significant divergence in monetary policy expectations between the European Central Bank and the Reserve Bank of New Zealand. Traders are likely assessing the implications of the RBNZ's anticipated rate cut in late May against the ECB's more measured easing path, potentially positioning for further EURNZD strength while remaining vigilant to impactful economic data from both regions and broader shifts in global risk sentiment.
ANALYSIS
What's happening with the Euro against the New Zealand dollar (EURNZD) over the next seven weeks? Well, its value will mostly depend on a few things: how the central banks in Europe and New Zealand act differently, key economic numbers from both places, and the overall global mood, especially with US trade policy.
New Zealand's central bank (RBNZ) is probably going to cut interest rates again in late May. They're concerned about their local growth and how US tariffs might hurt. On the other hand, the European Central Bank (ECB) might also cut rates in early June, but they seem a bit more cautious. That's because Europe's economy did pretty well in the first quarter, and their core inflation is proving a bit stubborn. So, important figures like New Zealand's Q1 GDP, plus Eurozone inflation and business activity reports (PMIs), will be big indicators of what these banks do next. Also, any drama from US-China trade talks could really affect the New Zealand dollar, which tends to react to global risk, making EURNZD potentially jumpy.
Taking a look at the EURNZD daily chart, the pair has been on a noticeable upward path since November 2024, when it was trading around 1.7900. It picked up speed through March 2025, pushing above 1.9100. Then, early April saw a sharp jump, with EURNZD briefly hitting near 1.9800. This spike happened when global risk fears around US tariffs were high, making the Euro look stronger than the New Zealand dollar, especially after the RBNZ cut rates. After that peak, as trade worries calmed down, the pair corrected back towards the 1.9000-1.9200 area. Now, in early May, EURNZD has been hovering around the 1.9000 to 1.9100 mark. This range seems like a fair spot for it, considering the expected RBNZ rate cut in late May and an ECB cut in June, alongside decent economic news from the Eurozone.
Key economic indicators and events that could influence EURNZD in the upcoming seven weeks (May 9 - June 27, 2025) include:
May 15, 2025: Eurozone GDP Growth Rate (Q1 Second Estimate). Period: Q1 2025. Previous Flash: +0.4 percent QoQ. Confirms economic momentum.
May 23, 2025: Eurozone Negotiated Wage Growth (Q1). Period: Q1 2025. Important for ECB's inflation outlook.
May 28, 2025: RBNZ Official Cash Rate (OCR) Decision & Monetary Policy Statement. Period: May 2025. Previous Rate: 3.50 percent. Forecast: High expectation of a 25bps cut to 3.25 percent.
Late May 2025 (Expected): New Zealand Budget 2025 Release. Period: 2025 Fiscal Year. Provides NZ fiscal policy direction.
June 5, 2025: ECB Interest Rate Decision & Press Conference. Period: June 2025. Previous Deposit Rate: 2.25 percent. Forecast: High expectation of a 25bps cut to 2.00 percent.
June 17, 2025: New Zealand Current Account. Period: Q1 2025. Previous: NZD -7.037B. Forecast: NZD -4.9B.
June 18, 2025: New Zealand GDP Growth Rate QoQ & YoY. Period: Q1 2025. Previous QoQ: +0.7 percent. Previous YoY: -1.1 percent. Forecast QoQ: 0.5 percent. Forecast YoY: -1.2 percent.
June 18, 2025: US FOMC Interest Rate Decision & Economic Projections. Period: June 2025. Highly influential for global risk sentiment.
June 20, 2025: Euro Area Inflation Rate (May Final) & ECB Economic Bulletin (with Staff Projections). Period: May 2025. Key for ECB's future path.
June 23, 2025: Eurozone HCOB Flash Composite, Manufacturing & Services PMIs. Period: June 2025. Timely indicator for Eurozone economic momentum.
TRADE PLAN
The primary driver for EURNZD over the next seven weeks is the anticipated monetary policy divergence between the RBNZ and the ECB. The RBNZ is expected to cut rates in late May and maintain a dovish stance due to domestic slowdown and global trade risks. The ECB is also expected to cut in early June, but recent resilient Eurozone data and sticky core inflation suggest their forward guidance might be less dovish than the RBNZ's. This divergence should favour EURNZD upside.
Here is a speculative trade plan:
Weekly Movement Outlook:
Week 1 (May 12-16): Expect the pair to be somewhat range-bound, possibly with a slight upward bias towards 1.9100, as markets await key US data (CPI May 13, Retail Sales May 15) and position for upcoming central bank meetings. Eurozone Q1 GDP Second Estimate is out May 15.
Week 2 (May 19-23): The New Zealand dollar might soften in anticipation of the RBNZ meeting. EURNZD could test the 1.9200 level, especially if Eurozone PMIs on May 22nd show resilience. Eurozone Q1 Negotiated Wage Growth is due May 23.
Week 3 (May 26-30): The RBNZ decision on May 28th is pivotal. An expected rate cut, coupled with dovish guidance, is likely to lift EURNZD, potentially breaking above 1.9200 and targeting 1.9250-1.9300. The New Zealand Budget 2025 is also expected this week.
Week 4 (June 2-6): The ECB rate decision on June 5th is the main event. If the ECB cuts as expected but signals a more cautious approach to further easing than the RBNZ, EURNZD could consolidate its gains or continue a gradual upward trend. Eurozone April Unemployment is due June 3.
Week 5 (June 9-13): Market focus will shift to relative economic performance. Eurozone April Industrial Production (June 13) and Balance of Trade (June 13) will be watched. EURNZD could maintain a steady to higher trajectory.
Week 6 (June 16-20): New Zealand's Q1 Current Account (June 17) and Q1 GDP (June 18) are crucial. Weaker-than-expected NZ GDP, alongside the US FOMC meeting (June 18) and final Eurozone May inflation (June 20, with ECB Bulletin), could see EURNZD push towards 1.9300 or higher.
Week 7 (June 23-27): Flash Eurozone PMIs for June (June 23) will provide timely activity reads. If the bullish scenario has played out, EURNZD could be approaching the take profit level.
Conviction and Risks:
My conviction for this long EURNZD trade is moderate. The fundamental theme of monetary policy divergence is strong. However, the actual forward guidance from both central banks can surprise. A key risk is if the RBNZ is less dovish than anticipated, or if the ECB signals a more aggressive easing path than currently expected. Global risk sentiment is another major variable; a significant "risk-on" wave could disproportionately benefit the New Zealand dollar, weakening EURNZD. Conversely, a sharp "risk-off" move might not uniformly favor the Euro, depending on the trigger. Stronger-than-expected New Zealand economic data (particularly Q1 GDP) or much weaker Eurozone figures could also invalidate the bullish EURNZD outlook. The 1.9000 level seems to be providing support, but a break below the stop loss would indicate a shift in the underlying dynamics.
Trade Levels:
Entry Level: 1.9070 (Near current consolidation, lower end of perceived fair value)
Stop Loss: 1.8870 (200 pips below entry, below recent lows)
Take Profit: 1.9370 (Aiming for a move towards previous consolidation zones, offering a 1:1.5 risk-reward ratio)
CONCLUSION
When it comes to trading the Euro against the New Zealand dollar (EURNZD) in the next seven weeks, you really need to watch how the New Zealand (RBNZ) and European (ECB) central banks are heading in different directions. The RBNZ will probably cut rates in late May, and the ECB is expected to do the same in early June. These moves are key, but what they say about their future plans will really steer the market.
You'll also want to keep a close eye on inflation and growth numbers from both New Zealand and the Eurozone, as this shapes what the banks say and what traders expect. And don't forget, the general global mood, especially anything related to US trade policy, can really stir things up for the risk-sensitive New Zealand dollar, causing some swings for EURNZD. So, to navigate this period well, you’ll need to really listen to what the central banks are saying, follow the economic news, and manage your risk carefully because the market mood can change fast. Keep in mind, this whole trade idea is speculative and relies on those bank policies actually going as expected.