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EURNZD Breaks Wedge Support, Targets 1.6620

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A few days ago I named a EURNZD rising wedge as my top trade idea to close out 2017. At the time the pair was trading 110 pips above wedge support near 1.6940.

Just 48 hours later, we have our breakdown. Wednesday’s 1.6832 close leaves no doubt as to whether or not sellers have cleared the trend line from the June low.

From here things are straightforward. Any retest of former wedge support as new resistance will likely encounter an influx of selling pressure. With that in mind, I will be on the lookout for selling opportunities between 1.6950 and 1.7000.

One thing I often talk about with regard to timing entries is a concept called mean reversion. It’s the idea that a market always returns to its average price.

How can we measure the average price?

I’ve found the 10 and 20 EMAs to work well on the daily time frame. If a market moves too far above or below these moving averages, I’ll stand aside. It’s a sign that prices are overextended and that a reversion to the mean is likely.

That’s what has happened to the EURNZD over the past 72 hours. The 350 pip decline has left prices overextended to the downside, which means some upward consolidation is likely.

As mentioned on Monday, the first key support area comes in at 1.6620. It’s the November low as well as the 38.2% Fibonacci retracmeent when measuring from the June low to the 2017 high. A daily close (5 pm EST) below that would expose the next key level at 1.6140.

Alternatively, a daily close back above former wedge support would negate the bearish outlook.

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EURNZD break of rising wedge pattern

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8 comments
medy says

can i sell now?

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    Ryan says

    IMHO, yes! Right now it is 11:30pm NY time and it just retested the 50DMA and bounced off R1 (pivot level) so its ready to drop again. It may retrace first like Justin said so make sure you have wide SL and maybe add to position at 1.70ish area. I just don’t see it breaking the 50 dma which is also the 50 1 hour ma which is also the R1 level which is also a round number (1.69). Come to think of it, havn’t seen this much confluence in a trade in a long time.

    Reply
abdrafiu gbola says

Good day, can a beginner in FX trade in GOLD and OIL?. What is yhe minimum deposit to start with?

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Steve says

Thanks for the heads up Justin

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TripTrap says

Justin I hope I don’t jinx this trade by saying this but wanted to congratulate you on your analysis. Man you NAILED it!!! Way to go! Perfect H1 pin bar bouncing down off of 1.69650 in the zone you predicted it would find resistance (re-test off the bottom of the rising wedge).
Even though it’s winter, I trust you got your shorts on !! I got mine on 🙂 Now let’s see if we get to those November lows you projected and perhaps even down to the October lows. Again…nice job and thank you kindly for bringing this trade to my attention.

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    ANETOR IBIKUNLE says

    Hahahahhaa! Yeah Trip Trap. Justin really nailed it. That 1hr pin bar rejection candle was So Cool.
    Thanks Justin.

    Reply
Nicky Barnes says

The market currently stands at 1.168607 as i write this comment. Am I good to enter at a sell? Take profit as 1.66200? Thank you for your help, Nicky.

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Roy says

This trade could take weeks to play out. I’m in for the long haul.

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