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.