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EURNZD: Awaiting Confirmation to Sell

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Apart from the yen, I don’t trade currency crosses very often. The price action can be choppy, and the spreads can sometimes be problematic if you aren’t careful.

However, if used sparingly, a cross like the EURNZD can offer opportunities where the potential reward is well worth the risk. Last week’s move may have given us one such opportunity.

Within the first 48 hours of activity last week, the pair traded to a high of 1.5483. The last time the Euro cross hit this mark was during the U.S. elections spike on November 9th of last year.

From the intraday charts, it looked as though buyers were determined to push prices even higher. But by the March 28th close, those same buyers had retreated in a way that they carved out a bearish pin bar from the 1.5450 resistance area.

The next three sessions were met with enough selling pressure to rechallenge 1.5215 support. In fact, Friday appears to have broken this level, which was instrumental in triggering the March 21st advance.

Last week’s 300 pip decline turns our attention to the weekly bearish engulfing pattern.

EURNZD weekly

Note the trend has been bearish since September of 2015. Also, the engulfing formation above occurred after a 950 pip rally from the current 2017 low at 1.4534. All of this points to a likely move lower toward the 1.50 handle.

But there is one important question that needs answering before I’ll be ready to call this a confirmed setup.

Did last Friday break support at 1.5210?

If it did, we should see today’s session close (5 pm EST) below this area. If on the other hand, the pair closes today back above 1.5210, I’ll stand aside to see what comes of the next 24 to 48 hours.

One reason I need additional confirmation is that Friday was the last day of March as well as the end of the first quarter of 2017. For the uninitiated, the price action from these sessions can sometimes be unreliable, particularly when it lands on a Friday as volume tends to dry up.

As always, I’m in no hurry to trade the pair. But with more than 200 pips to the next key support at 1.50, the EURNZD is certainly one I’ll continue to watch.

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EURNZD daily chart

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5 comments
Thami says

Hi, Justin
Great analysis, where exactly in terms of zone would you put the SL, at the lower high in the lower time frame as it makes a lower low or conservative ( just above the high of the weekly bearish engulfing)?

Reply
    Justin Bennett says

    If I had taken the trade, I would have put the stop above the daily candle.

    Reply
Graeme Normington says

Thanks again Justin. Would you be waiting for a good solid close below 1.5210 then a rally on either the daily or 4 hourly before considering going short?

Reply
    Justin Bennett says

    Graeme, I was treating it as an inside bar, which meant there was no signal to enter short.

    Reply
Linda B says

We’ve got the same situation with the Eur/Cad – and it’s closer to a new downward move.

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