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Important: I use New York close charts. Click Here to Use My Preferred Broker
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The EURNZD is down 200 pips since confirming the head and shoulders reversal on January 5. I mentioned this pattern several times before it confirmed, including December 28.
We even discussed a bullish exhaustion pattern when the Euro cross was trading 550 pips higher at 1.7132. That formation broke down on the 12th of December.
I like to keep things simple. Most of what I do and teach boils down to basic technical analysis principles. For instance, a broken support level tends to become new resistance and vice versa.
If the market closes the day above a resistance level, it will likely begin to act as support. On the other hand, if it closes below a support level, it will start to serve as resistance.
Simple enough, right?
However, the key is having the patience to wait for a session to close. Because I use New York close charts, that means waiting until 5 pm EST.
One of the very first support levels I mentioned for the EURNZD was 1.6630. It served as resistance in August and September of last year and later attracted buyers in November.
Notice what has occurred over the last 48 hours. The 1.6630 handle attracted an influx of buying pressure on Tuesday, but Wednesday’s session closed well below it. Sellers have since defended the area as new resistance.
I even commented in the member’s area following Wednesday’s close that the 1.6630 area should begin serving as resistance. I’m sure a few traders became a bit nervous when they saw the EURNZD spike to 1.6668 on Thursday, but the level is holding on a daily closing basis.
That doesn’t mean the pair can’t go higher from here. The only sure thing in this business is that there are no guarantees.
But as long as 1.6630 holds as new resistance on a daily closing basis (5 pm EST), the next key support at 1.6350 is exposed. A close below that would pave the way toward the head and shoulders objective just below the September 2017 low at 1.6140.
On the flip side, a daily close above 1.6630 would open the door to the December 2017 low at 1.6750.
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