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EURNZD: 760 Pip Bearish Reversal Alive Below 1.7100

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The EURNZD continues to churn sideways in what could be the right shoulder of a 760 pip head and shoulders pattern. We discussed the potential bearish reversal at the end of December as the pair was testing the neckline for a second time.

As mentioned in that post, it’s going to take a daily close (5 pm EST) below neckline support to confirm the pattern. That level now comes in at 1.6830/40.

Not surprisingly, we haven’t seen much follow-through from buyers or sellers. Volume is typically light this time of year, and without a catalyst, neither the Euro nor the kiwi want to give up recent gains.

Until one or the other starts to slip, we won’t see much movement here. However, I maintain the opinion that this is one of the better (potential) opportunities out there at the moment.

Former wedge support is still intact as new resistance, so no worries there. And at 760 pips, this could be an extremely favorable setup if EURNZD bears can get the job done. That puts the target just below the September 2017 swing low at 1.6140.

But for now, a daily close at 5 pm EST below 1.6830/40 would open the door to the November low at 1.6620. A break there would expose the October 17 low at 1.6350 (also the 50% retracement of the rising wedge) followed by 1.6140.

As long as the 1.7100/50 area holds as resistance, there’s a good chance of an extended move lower. Even a retest of the 1.7200 handle would merely test the high of the left shoulder and would not negate the potential for a reversal.

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EURNZD possible head and shoulders pattern

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17 comments
Tawanda says

you ill teach me how to trade this because this is good my dream is to be a good trader

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Joshua says

So, if EurNzd closes outside the neck support (trend line) is a confirm sell all the way to 1.1640

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    Justin Bennett says

    There are never any guarantees. As mentioned above, 1.6620 comes in long before 1.1640. But as of right now, nothing is confirmed.

    Reply
Steve says

Thanks Justin. The pair is doing pretty well at the moment. 1.6140 falls on 61.8% Fibonacci level on weekly chart. Just a matter of time before the setup is confirmed.

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    Justin Bennett says

    You’re welcome. Yes, a couple of others line up with Fib levels as well.

    Reply
lupenama says

morning justin
correct me if i am wrong, looking at daily chart of kiwi/dollar, it look like it is in the 4th wave whereas euro is in the 5th wave up err i forgot you dont do elliot wave analysis right? sorry abt that….

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    Justin Bennett says

    I don’t use EW, sorry.

    Reply
Roy says

Nfp due out today. I’m on the side lines till next week.

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Roy says

Sorry Justin commented on wrong pair.

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TripTrap says

Hello Justin….thank you for making me aware of this short opportunity!

This morning after bumping around the critical 1.6835 neck-line level that you noted it does appear now (barring some big inter-day reversal) that this pair has pushed through this level and is headed south. I have noted your important support / targets on the chart if indeed the pair does close below 1.6835 tonight (Friday, Jan 5th).

You mentioned the next probable support / target would be 1.6620. One critical area of support before that IMHO is the 1.6740 area. Yes, that is December’s low but also just happens to be where you will find the Daily 100 SMA slanting upward. This moving average at the D1 time-frame has been important for this pair for support and resistance. The last time this pair was below this MA for any length of time was March 3rd, 2017 when this massive uptrend began. Price has found support along this line several times in this uptrend before pushing higher. It will be an interesting battle between the bulls and the bears when we get to 1.6740 (or wherever the MA is at the time it meets price). It could also be a level that gets gapped through on a Sunday night.

Hopefully it does break down through and we are in for a long ride heading south down the pip highway!!

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Keithan says

The January 4th daily candle closed above 1.683 though?

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    Justin Bennett says

    I didn’t say anything about it needing to break the neckline within a certain period of time. The only close that matters is the one that occurs below neckline support.

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Andrea says

Hi Justin. Breakout of the neckline occurred yersterday. Now have to watch the mean, wait for a possible retest and a price action signal. In case price reaches the 1st target with no retracement I will stay sideline until it breaks out the 1.6620 level. Am I wrong?

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Jaspreet says

Where is your stop going to be, Justin? Thanks.

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Diana says

ON Friday December 5 this did close below the neckline!

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Haitham says

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Haitham says

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