In this paper, we present a detailed evaluation of cross wavelet analysis of bivariate time series. We develop a statistical test for zero wavelet coherency based on Monte Carlo simulations. If at least one of the two processes considered is Gaussian white noise, an approximative formula for the critical value can be utilized. In a second part, typical pitfalls of wavelet cross spectra and wavelet coherency are discussed. The wavelet cross spectrum appears to be not suitable for significance testing the interrelation between two processes. Instead, one should rather apply wavelet coherency. Furthermore we investigate problems due to multiple testing. Based on these results, we show that coherency between ENSO and NAO is an artefact for most of the time from 1900 to 1995. However, during a distinct period from around 1920 to 1940, significant coherency between the two phenomena occurs.