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With most of my attention on the Japanese yen of late, I figured I would change things up a bit and talk about a currency cross that could be on the verge of a big move.
Following a two-year high in December, the EURNZD lost nearly 1,000 pips at its recent low of 1.6521. However, buyers have since managed to claw back more than half of those losses in the last four weeks.
But despite their efforts, the upward movement that began at 1.6521 has lacked conviction. Moreover, a view of the last twelve months shows a change in the price structure.
Notice how each swing low following the 2017 bottom has been higher than the last. That is until January of this year.
The January 11, 2018 low at 1.6521 is the first lower low in twelve months. That’s the first sign of weakness here, but a subsequent lower high would reinforce the idea that the EURNZD is topping.
So how can we trade renewed weakness?
The way I see it, that conviction-less rally that began last month is consolidation in the form of an ascending channel. As such, a break below the lower portion of the structure would present an opportunity to get short.
That said, it isn’t a matter of just piercing support. Everything I do is based on the closing price, whether it be a 4-hour or daily close using New York close charts.
So until we get a close below support somewhere near 1.6800, there isn’t anything to do here. In fact, I’m firmly against betting on consolidatory moves, particularly with a highly volatile cross like the EURNZD.
It’s also worth the wait as the objective for such a trade comes in at 1.6140 which is also the September 2017 low. I’ve had this level on my radar for some time now.
Move to the weekly time frame and view the price action since 2012 to see why I believe 1.6140 to be so significant. I also think we could see a bid develop at the recent swing low at 1.6520 as well as the October 2017 low at 1.6363.
And for the Fibonacci fanatics out there, 1.6140 is the 161.8% extension of the range between the January low at 1.6521 to the February 5 high at 1.7100.
But again, none of this means anything without a close below channel support. It might happen tomorrow, next week or two weeks from now, so patience is key here.
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