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EURNZD Bear Flag in Focus as Consolidation Ends

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EURNZD has been quite the roller coaster ride over the last seven months. After rallying 4,600 pips between April and August, the pair has struggled to maintain its gains over the last two months.

Now more than 2,000 pips off the current 2015 high, the pair may be readying for another leg down. This shouldn’t be too surprising given the price action that has been unfolding since late October.

I often talk about a technique that involves reading the angles of a market as a way to gauge the varying levels of supply and demand. It just so happens that the last two months of EURNZD price action make for a perfect candidate for this technique.

The daily chart below tells the story.

EURNZD supply and demand

If demand were strong at current levels, we would have likely seen a more substantial push higher off of the 1.6200 key level. As it is, the pair barely managed to gain 400 pips over the last month.

This should be especially alarming for any bulls given the fact that EURNZD lost more than 1,800 pips in the 5 week stretch between September 18th and October 23rd.

While 1,800 pips lost in 5 weeks followed by 400 pips gained in 4 weeks isn’t exactly the recipe for a short setup, it does illustrate the idea that demand has been hard to come by.

Clearly buyers aren’t seeing the value at current levels, which leaves us looking lower. To top things off, the 4 hour bear flag that recently confirmed could be signaling the end of consolidation and the start of the next leg down.

You may notice the close proximity of current prices to the aforementioned 1.6200 handle. This leaves traders with the option of waiting for a close below 1.6200 rather than entering on the break of channel support.

Either option is a perfectly viable approach. Like all things in the world of Forex, it comes down to what your trading plan calls for as well as what fits your overall trading style.

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EURNZD bear flag pattern on the 4 hour chart

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4 comments
Ashakar Rasul Nomani says

sir justin, i saw the payer EURNZD had a weekly gap last June 9,2015 and 11 June 2015. so,can i follow here a gap strategy?

Reply
    Justin Bennett says

    Ashakar, that sounds logical to me. It lines up pretty well with the 1.5660 level that I pointed out in the commentary.

    Reply
Lorant Denes says

Hi Justin,
do you think the same bear flag pattern forming on GBPNZD?

thx

Reply
    Justin Bennett says

    Lorant, I don’t see one. If it’s there it isn’t nearly as “clean” as the one I pointed out on EURNZD.

    Reply
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